Market Update: 5/23/2022
Economic results arrived with a frenzy last week and there are signs that the consumer is rolling over. Home sales were down 6% from a year earlier and delinquencies on subprime car loans hit an all time high according to Equifax. That was coupled with earnings misses from both Walmart and Target, which knocked out 25% of their market cap respectively. These signals indicate consumer belts are tightening and demand may be dropping. Demand destruction is the key objective of Fed policy, and a slowing economy will curb inflation. The treasury market is showing signs of this slowing as the 10 year treasury rate has declined for the past two weeks.
The challenge for investors is how to begin to make investments for the next many years at these discounted prices without having a huge drawdown. Our approach is to dedicate small fractions of accounts we manage to companies we like that have already fallen dramatically. If those stocks fall further, we would be inclined to buy more with idle cash. As challenging as it may be, this is a time to be patient, observant and logical. As always, I appreciate your continued trust and confidence.