Marc Cuniberti The obvious question for investors at this point in time is if the crash in stocks that took out the first 10 weeks of 2022 over, or are we just seeing a technical bounce in the indexes only to be followed by another painful round of more red sometime in the near future?
Analysts are split on what is to come and I have to admit, where this thing could go is a crapshoot. I hate using that term when it comes to the stock market, but there is much to fear that could move stocks down and other influences that might lead to a continuing recovery in equity prices.
On the negative side, currency events scare the hell out of me. Think of the Greece default or other sovereign events (sovereign=national) that made the news in recent decades. When an entire country gets into trouble either domestically with its economy or globally with its currency, this kind of event can wreak havoc on world markets. And right now, the economies of the world are at an inflection point due to CoVid, inflationary pressures, and global conflicts.
Interest rate manipulations by a G7 country, in which the biggest dog in the fight is the U.S.A, can also roil global financial systems. The U.S. Federal Reserve has started and will continue to raise interest rates in an attempt to harness inflation. The interest rate moves they will make as a result of their attempt to address rising prices have a historical tendency to slow markets, and will likely put negative pressure on equities (stocks).
As a side note, the continued bite of inflation could also put a damper on consumer spending as a whole. And although energy prices are a big part of the pain of inflation, Washington is flip-flopping on oil companies once again. Initially, against more oil drilling, Biden’s pleas to these same companies during his press conference on March 31st to increase drilling to increase supply was coupled the proposed fines if drill leases sit idle. Oil execs are probably rolling their eyes in distrust and may continue to play the middle ground in response to their inability to know where Washington will go next as it pertains to their businesses.
Always lurking to throw markets a curveball, a “Black Swan” event (a random and unforeseen event like 9/11) is always a threat but when they happen, since they are random, we can do little to prepare for them.
On the plus side, the reopening of America is well underway, and the consumer is ready to travel, vacation, dine out and shop. From a year-over-year comparison, there is nowhere to go up. As people start to reengage, many industries that were previously hurt by the shutdowns will start to see their revenues climb and their stock prices should reflect that.
The monetary considerations are many, some positive and some negative. Federal spending has been and continues to be off the charts positive. It is said don’t fight the fed. What that means is as federal spending increases, much of that spending ends up in the stock markets. Although many federal CoVid spending programs are done, there is a lot of money still in the pipeline and it will continue to flow into the economy. Incredibly, there are still more programs working their way through Congress and if passed, even more funds will be showered down to consumers and into business pocketbooks.
All in all, there are many cross-currents to consider and the final result of all these different events in the markets is yet to be seen. The sum of the negatives and positives will definitely jerk markets all over the place, and where it stops, nobody really knows.
One thing is certain, however, many of the stay-at-home stocks have been hammered badly in the first part of 2022. If an investor is careful and does his or her research, a slow accumulation of beaten down but still good companies may bode well for the long-term investor.
This article is not a recommendation to buy or sell any security or investment and expresses the opinion only of Marc Cuniberti, and may not represent those of this news media and should not be construed as investment advice nor represents the opinion of any bank, investment or advisory firm. Neither Money Management Radio (“Money Matters”) nor Bay Area Process receive, control, access or monitor client funds, accounts, or portfolios. Contact: (530)559-1214 or [email protected]. Marc was recently voted in the “Best of Nevada County” – Best Financial Advisor of 2021 by popular vote.
