It's easier to write this on Tuesday afternoon instead of Sunday, but the market has a tendency of moving to extremes, quickly. That is one of the biggest investing specific takeaways of the pandemic and post-pandemic market - the next three months, in the market's view, might last forever, and stocks are accordingly priced that way.
That is not to say that we hit a bottom last Thursday. I don't know whether we did, and the market isn't exactly cheap. It's not to say that the facts haven't changed since all-time highs at the beginning of the year either; inflation has been more persistent than most expected, economic growth has underwhelmed, and the Fed is hiking to beat the band in any case. Oh, and that's before touching on the price of oil and the Russia-Ukraine war.
At the same time, things felt a little too apocalyptic in the wake of the most recent CPI report and the subsequent Fed Reserve rate hike. The S&P 500, to use a peg, dropped 12% in two weeks. It wasn't quite the 20% two-week drops we saw in March 2020, but it wasn't all that far off. And, while I think caution and portfolio discipline is warranted, it also felt like the economic picture was not quite matching the market picture.
On the Razor's Edge, my co-host Akram's Razor and I talked about the market and why apocalypse isn't quite warranted. We discussed green shoots in the supply side of the inflation equation and why the energy pullback was the other side of the seesaw from the broader market sell-off. We compared this to the March 2020 period and talked about strategies for finding new ideas, and also dug into the risks of investing in any individual names, especially if inflation doesn't slow down. You can stream the episode in full below, or find it on your favorite podcast players.
Topics Covered
- 2:00 minute mark – An apocalyptic moment? Maybe not
- 10:00 – Is supply solving itself just as demand is weakening?
- 20:00 – The energy pullback – why was it predictable
- 23:00 – The echoes of March 2020
- 30:00 – Crypto contagion and its risks
- 38:00 – Opportunities in the current market
- 48:00 – What if inflation doesn’t slow down?
- 52:00 – The challenge of individual names and the hopes for a quiet summer
Disclaimer: Akram's Razor is long Boeing (NYSE:BA), Zoom (NASDAQ:ZM), Twitter (NYSE:TWTR), Juniper Networks (NYSE:JNPR), and DocuSign Inc (NASDAQ:DOCU), and I am long Discover Financial (NYSE:DFS), VMware Inc (NYSE:VMW), Honeywell (NASDAQ:HON), and Twitter.