What to Expect in the Stock Market June 13-17
That was the universal reaction to the Stock Market last week.
Before Inflation numbers were released on Friday, the stock market was just kinda surviving. But once those numbers dropped the bottom fell out of the market. There was absolutely no safe place to hide. Usually, I would try to find some positive in the numbers but not this time. Where we are right now is BAD (more on this below).
Market Last Week Results:
Tale of the Tape
Economy
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Inflation came in much higher than expected for the month of May as gas prices forced everything to be much more expensive.
The average cost of gas is now $5/gallon
After declining slightly from March to April, Inflation rose back to March levels in May
Everything is much more expensive
Shelter (rent and home) rose 5.5% over the last year
Food costs rose 10.1% in the same time period
Airfare is up 38% as well
This is putting more pressure on workers’ pay. Although workers have seen their pay rise at the fastest pace over the last year, inflation has tampered with workers actually feeling the benefit of it
On an inflation-adjusted basis, workers’ pay fell 3% over the last year
All eyes are back on the Fed and how they will deal with inflation
Remember the dual mandate of the Federal Reserve: Full employment (they got this on lock) and Stable prices (not so much here)
The problem is the Fed can’t really do anything about this inflation with its toolset of interest rate adjustment and monetary supply management. This inflation is due to
War in Ukraine
China's Shutdown
Oil Producers not producing
Backlog of Supply Chain issues from the pandemic
All the Fed can do is destroy demand bluntly by raising rates, which could cause a recession. The expectation is that they will go from a 0.5% interest rate increase to 0.75% or even a 1% increase at the next FOMC meeting (which is this week)
My Takeaway: 10 of the last 11 recessions have been preceded by a sharp rise in energy prices.
Higher energy prices remove disposable income that can go to other things.
This in turn causes everyone to get scared and begin hoarding cash and forgoing large-item purchases that they may need (like me not furnishing the last bedroom in my basement)
Which crimps demand and as the US is a 70% consumption economy that causes a recession.
One man's spend is another man's paycheck
But the one positive of this, high gas prices might push people to buy electric everything over gas. (I bought an electric mower, blower, and trimmer instead of a gas one)
Next time you go eat at a restaurant. You might want to examine your bill a bit more closely.
Restaurants are adding more fees than ever before to try to fight back against inflation
According to Lightspeed, a global developer of point-of-sale software, Restaurants have increased service fees by 36% over the last year.
Here are a couple of the new Fees you may find
A fuel surcharge fee
A non-cash adjustment fee if you choose to use a credit card over cash
A kitchen appreciation fee
A temporary fee which makes no sense to me cause the fee ain't temporary if it never rolls off my account
Inflation is killing everyone and businesses are looking for ways to fight back, it will be interesting what the point is where consumers say I’m cool with eating at home
But restaurants ain't the only ones trying to get more only out of your pockets for a bit less service.
Shrinkflation is a phenomenon where companies shrink the size of their products while keeping prices the same or in some cases increasing them
It is on the rise all over the world
Everything from Gatorade to Lays Chips to Toothpaste to Charmin Roles
More companies are beginning to tighten the reigns on hiring. Now to go along with a hiring freeze, they are beginning to rescind jobs that have been offered
Coinbase, Redfin, and Twitter are a few companies that are telling candidates, "Sorry but not this year."
Companies are learning quickly that you have to have some sort of balanced budget and that cash is the only way to survive
However, this is mainly happening to Tech companies as markets have tightened up and capital and debt are not as cheap anymore.
These companies were the darlings of the markets last year and were hired with the expectation that growth was forever and nothing could slow them down. Well that was not the case
The good news for most of the people who are getting offers rescinded is they will be okay. They may not be getting paid as much as they would want but they'll find another job pretty quickly
My takeaway: Not a good look for the businesses that are doing this. However, the companies that are well-positioned can use this as an opportunity to steal good talent.
Random Interesting/SAD Facts
The number of US CEOs that sent a letter to the Senate to "take immediate action" to reduce gun violence
Of note, some of the largest companies were not on the list including the company I work for
Will this actually move the Senate?
HELL NO!!
If the Senate was not moved by the testimony of an 11-year-old girl talking about how she saw her teacher get shot in the head and then had to smear the blood of her classmate on herself and play dead, then CEOs talking WILL definitely not get them to do anything
In the end, guns in the US is a religion.
People who love guns REALLY love guns. The way they see it, its not guns that kill people. People kill people.
In their mind, most gun owners are responsible citizens who handle their guns with care
So why should they be punished for the bad apples
Ironically, when seat belts were first enforced these were the exact same kind of arguments that were used
Looking Ahead
The only thing anyone cares about is what Jerome Powell and his buddies are going to announce on Wednesday after the Federal Open Market Committee meeting. After the horrible inflation report of Friday, everyone is looking for the Fed to be much more aggressive in dealing with inflation. The only problem is if the Fed goes too hard too fast, it can cause a recession.
Sports I Care About Update
Golf is making a ton of headlines. But as I do not care about Golf, we will ignore all those headlines and focus on the important sports. Meaning Golden State vs Boston
I am very surprised as to how well Boston is matching up against Golden State. Jalen Brown and Jayson Tatum are doing work against the Warriors. I still think the Warriors are going to win but the Celtics are giving them a hard time.
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Remember GENEROSITY > greed
God bless Each and Everyone of y’all
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