Mixed economic signals continue to arrive each week and, accordingly, the markets are struggling to find direction. The best place to measure the state of the economy is the quarterlies and the numbers from Walmart, Amazon and Target show that some consumers are starting to buckle under the inflation pressure of gas and other necessities. But what’s challenging right now is that investors may cheer downbeat economic results as that means there may be less Fed tightening. The question remains as to when decreased consumer demand will drawdown inflation and the early data shows inflation is decelerating as the PCE has fallen for the last three months.
How do you invest during all this economic chaos? By being selective and avoiding as many mistakes as possible. Interest rates on bonds continue to yield less than inflation making them unattractive. Real-estate is also starting to show signs of cracking as mortgage rates are up 67% over the last year. In Charleston, inventory on the MLS has gone from 900 offerings to 1600 over the last few weeks, nearly doubling. That stands well below the average of 5000 listings, but rising fast. While we continue to avoid those asset classes, the stock market may have bottomed as the S&P 500 had a dramatic 6% rally in the last week of May. Under all the headlines, SOME stocks are going up after their tremendous drawdowns. If you look at why, you’ll find these companies are growing their sales and earnings faster than inflation and they warrant exposure. As always, I appreciate the continued trust and confidence.