Focus on income amid volatility
Once again, we face uncertainty this week as the market and factors influencing it, such as the conflict in Ukraine, continue to evolve. A frustrating aspect of the market is that the greater the impact an external issue has on stock prices, the harder stock prices are to predict. Currently, the crisis in Ukraine is the external factor that is so fluid from moment to moment that traders have no choice but to hang on and wait.
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Monday: The silver lining amid relentless volatility
As expected, the market didn’t move last week (or at least stocks didn’t move much). On the one hand, this is a good thing because it signals that traders are trying to consider an end to the crisis in Ukraine. However, savvy investors should have contingency plans in place for the three most likely trends for stocks and S&P500 as the Ukraine crisis drags on and inflation continues to soar.
It’s hard not to be confused and uncertain right now. While underlying market fundamentals are strong, uncertainty surrounding the impact of the crisis in Ukraine is keeping prices low. However, we believe it is still a good time to accumulate stocks while prices are low.
During Monday’s live stream, we covered how to plan for three upcoming market trends. Click here now to subscribe to our Monday and Thursday updates, which air at 7:00 p.m. EST.
Wednesday Weekly Update: Focus on Revenue This Week
Currently, the crisis in Ukraine is the external factor that is so fluid from moment to moment that traders have no choice but to hang on and wait.
Excluding the impact of the crisis, the underlying market fundamentals are still good. Earnings growth is expected to continue, jobs are being added, wages are rising and interest rates are still near historic lows.
However, before the crisis, the big X-factor that triggered volatility was rising inflation rates. As we explained earlier, inflation generally rises with economic growth, but if it exceeds growth, it can hurt the economy and reverse market gains.
At this point, we are cautiously optimistic that a plan to end the conflict will be achieved in the short term, which is the goal of the sanctions and export bans applied to Russia. For now, we expect support on the S&P 500 to hold near its lows set in February – near 4,150-4,200.
We expect traders to remain in a holding pattern awaiting some signs of a potential resolution to the dispute.
Last night’s livestream: Soaring inflation threatens stocks
Inflation is raging at levels not seen in 40 years, climbing 7.9% year-on-year. This puts the Fed in a difficult position and warns Wall Street that rates could rise faster than expected in 2022, even if the war in Ukraine continues and dampens expectations for global economic growth. Can equities hold at this current level?
With the 10-year treasury bill (TNX) rate rising over the past three days, we are again above the key 2% threshold. Just like in February, people are getting tense in anticipation of the impact of this spike on big tech stocks. For more on inflation-threatening stocks, click here to watch the YouTube live stream of last night’s Learning Markets.
Be sure to watch our bi-weekly live streams Mondays and Thursdays at 7:00 p.m. EST on YouTube.
We will be back with you next week.