ASPIRA’S TIMELY MARKET DISPATCH THE FEAR IS PALPABLE
May 2nd, 2022
For clients receiving this missive, please be advised that most household accounts (a blend of our strategies) have pegged in at the -5% to -6% range on a year to date basis, to April 30, 2022. Our Canada only Keep More Income and Next Cycle Resource Fund strategies remain strongly double digit on a stand-alone basis.
So yes, the month of April was a tough one for investors, but here is a fresh spring perspective from the 91 year old sage of Omaha, Warren Buffett, Chairman and CEO of Berkshire Hathaway. At this past weekend’s annual meeting, he revealed that the company spent some $51 billion on the likes of Apple, Chevron and Occidental Petroleum and a smattering of others, during the April selloff. He likes cheaper stock prices and we do too. It fits nicely with his now famous quote, “we try to be greedy when others are fearful and fearful when others are greedy”.
And yes, investors are fearful. Below is a chart of the American Association of Individual Investors weekly survey for the last 35 years up to Thursday, April 28, 2022. In a nutshell, retail investors are about as fearful today as they were at the start of the 1990 Gulf War, the 2008/09 real-estate collapse and the Covid induced market rout. They are more fearful than they were in the dot.com meltdown and after 9/11.
So what does that mean? Let’s start with what the above chart is not telling us. It is not telling us that markets cannot go down from here. It does not mean that we are done with higher inflation, higher interest rates, war fears and or supply disruptions. Rather it is telling us that a lot of the current fear could already be priced into stocks and any lessening of those fears could very well pave the way for higher stock prices.
Let’s look at some of the things investors are concerned about via a smattering of charts and our take on what the charts are telling us.
While we see good value in a lot of energy stocks, oil looks to have peaked for the foreseeable future.
The demand for copper is clearly abating – points to slower growth and less inflationary pressure.
The semiconductor space has taken it on the chin – the slower growth is not confined to manufacturing.
The transports are already signaling a slowdown, which is now well underway.
The world’s 10-year benchmark interest rate just pegged 3% - we are biased to the downside.
Bottom line, the above charts paint a picture of inflation, commodity prices and long-term interest rates that have already peaked – the economy is slowing. It remains to be seen if we move into a recession.
Our standard counsel applies. Investor behavior is the #1 determinant of lifetime returns. The time to send money is when most investors are clearly fearful. Will you be that kind of investor? Will you emulate Buffett?
Please feel free to share this missive as you see fit and please do reach out to us if you would like more information.
Chris Raper, CIM, CFP ®
Senior Wealth Advisor | Portfolio Manager
Aspira Wealth of Raymond James Ltd.
This newsletter has been prepared by Chris Raper and expresses the opinions of the authors and not necessarily those of Raymond James Ltd. (RJL). Statistics, factual data and other information are from sources RJL believes to be reliable but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. This newsletter is intended for distribution only in those jurisdictions where RJL and the author are registered. Securities related products and services are offered through Raymond James Ltd., member Canadian Investor Protection Fund. Insurance products and services are offered through Raymond James Financial Planning Ltd., which is not a member-Canadian Investor Protection Fund. Raymond James (USA) Ltd. (RJLU) advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered. Raymond James (USA) Ltd., member FINRA/SIPC
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