Market Update for March 14, 2022
Welcome to the new blog! I endeavor to post at least once a week and ideally more often than that, so please check back periodically for updates. This is a faster way to get important market thoughts out than periodic newsletters.
The S&P 500 is holding in the 4,200 range, specifically 4,180 as I type this update on 3/14/22. There has been little interest in selling beyond about this level, although we remain near the lows for 2022. I am not the only one who has noticed this:
“The near-term risk/reward is positive if for no other reason than the tape just had about every bit of negative news thrown at it and still couldn’t sustain a material break below the 4200 level," said Adam Crisafulli, founder of Vital Knowledge.
Value stocks are doing fine, and part of the reason for that is oil and gas stocks are generally positive year-to-date, and that sector falls within the value purvey. Growth stocks continue to get punished, though it seems to me some quality technology companies are going “down with the ship,” and maybe not for good reason.
This is a VERY important week for the markets. The Fed has a highly-anticipated announcement on Wednesday the 16th. That they will raise the Fed Funds rate 0.25% seems a foregone conclusion: the real drama will be in the statement released and any commentary Chairman Jerome Powell makes related thereto. Powell already admitted about a week ago that the Fed was behind the curve on interest rate increases as it relates to inflation, but of course the same could be said about the developing difficulties in Ukraine. You don’t generally want to raise rates into the face of geopolitical turmoil, and yet if the Fed doesn’t raise rates inflation can get even more out of hand. In short, they have to thread the needle to quell inflation and yet not upset the markets any further - it is a difficult, but not insurmountable, task.
Asset-class wise I am interested in US large-cap value stocks, as they are holding up well, US large-cap growth stocks, as I think they are oversold/becoming better values, and to some minor degree high-yield bonds, as companies retain quality balance sheets with robust cash levels. I am disinterested in all other bonds, small-and-mid cap stocks (especially growth-leaning areas), and international and especially emerging markets’ stocks seem like a pass for some time into the future as the Ukraine situation unfolds. CD’s and fixed rates could get slightly better later this week and next week with the assumed Fed rate increase, but we are talking about minor positives and still very low rates. I hesitate to commit money to a 1 to even 3% fixed rate in a world where the last inflation reading for February just came out at 7.9%. Others agreeing with this sentiment could put a floor on further stock market pressure. Time will tell.