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- nerpnerp
  ·2022-03-30
  i am in deep thought 🤔🤔🤔🤔🤔🤔
  Stocks Have Rebounded, But The Outlook Ahead Is Very Mixed
  bowie15/iStock via Getty Images Main Thesis / Background The purpose of this article is to discuss t
  Stocks Have Rebounded, But The Outlook Ahead Is Very Mixed
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- nerpnerp
  ·2022-03-30
  $Vanguard S&P 500 ETF(VOO)$wow that's insane!!!!!
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- nerpnerp
  ·2022-03-05
  $Vanguard S&P 500 ETF(VOO)$finally bought it!!!!!!!!!!!
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am in deep thought 🤔🤔🤔🤔🤔🤔","listText":"i am in deep thought 🤔🤔🤔🤔🤔🤔","text":"i am in deep thought 🤔🤔🤔🤔🤔🤔","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9019742729","repostId":"2221406269","repostType":2,"repost":{"id":"2221406269","kind":"news","pubTimestamp":1647959749,"share":"https://ttm.financial/m/news/2221406269?lang=&edition=fundamental","pubTime":"2022-03-22 22:35","market":"us","language":"en","title":"Stocks Have Rebounded, But The Outlook Ahead Is Very Mixed","url":"https://stock-news.laohu8.com/highlight/detail?id=2221406269","media":"seekingalpha","summary":"bowie15/iStock via Getty Images Main Thesis / Background The purpose of this article is to discuss t","content":"<html><body><p><figure><picture> <img height=\"1156px\" src=\"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/160585935/image_160585935.jpg?io=getty-c-w750\" srcset=\"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/160585935/image_160585935.jpg?io=getty-c-w1536 1536w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/160585935/image_160585935.jpg?io=getty-c-w1280 1280w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/160585935/image_160585935.jpg?io=getty-c-w1080 1080w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/160585935/image_160585935.jpg?io=getty-c-w750 750w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/160585935/image_160585935.jpg?io=getty-c-w640 640w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/160585935/image_160585935.jpg?io=getty-c-w480 480w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/160585935/image_160585935.jpg?io=getty-c-w320 320w, https://static.seekingalpha.com/cdn/s3/uploads/getty_images/160585935/image_160585935.jpg?io=getty-c-w240 240w\" width=\"1536px\"/> </picture><figcaption> <p>bowie15/iStock via Getty Images</p></figcaption></figure></p> <h2>Main Thesis / Background</h2> <p>The purpose of this article is to discuss the current state of the broader equity markets, with a primary focus on the opportunities in the U.S. and elsewhere. We are in the middle of a difficult time to navigate, but the ongoing uncertainty from the violence in Europe, U.S. rate hikes, and inflation all present opportunities for long-term focused investors. Yes, more pain could be forthcoming, but buying when there is fear in the air typically makes for a rewarding experience (think 2020). While I do expect positive gains this year to be modest, investors can amplify those index returns by opportunistic buying. This was the case last week, and I expect similarly strong weeks in the months ahead.</p><div></div> <p>Of course, I do not see stocks going up in a straight line. I will continue to advocate having cash on hand to buy any forthcoming dips, which could mean taking some profit/reducing exposure when markets rebound. The point is to not be all-in or all-out of the market right now, but to capitalize when investors panic over what should turn out to be short-term risks. To be fair, I don't see the crisis in Europe de-escalating any time soon, but I also wouldn't suggest it will broadly expand and become a multi-year risk. That means buying in when actions over there spark market fears. It also means, above all, to remain diversified within sectors and across borders going forward.</p> <h2>Volatility Is Elevated, Investors Are Bearish</h2> <p>To begin, I want to touch on a few reasons why investors <em>would </em>want to be buying now. I look at this as a classic, \"buy when everyone is worried\" mentality. Of course, this strategy has risks of its own. It is very difficult to time a market bottom, and during periods of elevated volatility investors need to anticipate above-average drops (or increases) in the market, and the corresponding losses that could come with it. As a result, buying during times of uncertainty, while typically profitable, is not for the faint of heart, or for those who cannot withstand amplified swings to their portfolio balance. I mention this to manage expectations - as buying now is not for everyone.</p> <p>That said, <a href=\"https://laohu8.com/S/AONE.U\">one</a> of the more time-tested ways to \"beat\" the market is to buy when people are fearful. This is a common adage, but one that bears repeating. The reason is that while it <em>sounds </em>obvious it is much more difficult to actually implement in practice. Psychology takes hold here, and investors who are currently feeling worried may not be so willing to buy, even if their education and training suggest they should.</p> <p>This brings me to my point that now could definitely be one of those times to start buying. While markets have indeed begun to rebound already, they are still off their recent highs. Further, volatility remains elevated, indicating to me that investors are continuing to bake a lot of fear and worry into current prices:</p> <p><figure><span><img loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2022/3/20/10779721-16477809953304956.png\"/></span><figcaption><p>VIX Index <span>(Bloomberg)</span></p></figcaption></figure></p><div></div> <p>Again, this does not guarantee you will get a positive return if you buy here. Heightened volatility usually means the short term will be rocky. While I would suggest that over time positions now will eventually find their way in the green, the ride to get there may not be very smooth.</p> <p>Expanding on this point, we can look at another metric to suggest buying now could be a smart idea. Gauging investor sentiment is something I do on a weekly basis through the American Association of Individual Investors (AAII) sentiment survey. Using this, I try to be contrarian, buying when sentiment seems overly bullish, and vice versa. Looking back at the past few weeks, we have seen bearishness march markedly higher, despite markets finding some more solid footing:</p> <p><figure><span><img hspace=\"6\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2022/3/20/10779721-16477810389997118.png\" vspace=\"6\"/></span><figcaption><p>Investor Sentiment <span>(AAII)</span></p></figcaption></figure></p> <p>These sentiment results help to speak for themselves on why buying when others are worried can make sense. Investors increased their bearish sentiment during a period when markets were moving higher:</p> <p><figure><picture> <img hspace=\"6\" loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2022/3/20/10779721-16477817550242212.png\" vspace=\"6\"/> </picture><figcaption><p>Last Week Market Returns <span>(Google Finance)</span></p></figcaption></figure></p> <p>Simply, when there is a lot to worry about, individual investors get nervous and refrain from buying. Unfortunately, this is precisely when you want to be buying, as last week's action indicates. There are always going to be macro-concerns, whether in the U.S. or abroad. But the key is finding those moments when worry seems exaggerated, and buy during those times. The past week is a good example, and I believe we will continue to see those opportunities in the weeks and months ahead.</p><div></div> <p>*For broad market exposure, I own the Vanguard S&amp;P 500 <a href=\"https://laohu8.com/S/PSFF\">Pacer Swan SOS Fund of Funds ETF|ETF</a> (VOO) Vanguard Total Stock Market ETF (VTI), Invesco QQQ (QQQ), ProShares Ultra S&amp;P500 (SSO), and the SPDR Dow Jones Industrial Average ETF (DIA).</p> <h2>Historically, Fed Rate Hike Cycles Are Positive. But Not Always</h2> <p>While I just suggested that buying now has merit, I am not blind to the risks we face right now. I am <em>not </em>making the argument that readers should go \"all-in\" or even get overly aggressive. I do think now is a smart time to add cash, especially if one had been profit taking at points throughout last year and this year. Adding during times of stress, volatility, and worry is smart, but we want to manage our expectations it will be a bumpy ride as well. There are very valid reasons why investors are nervous, and those should not be completely discounted when anticipating future returns.</p> <p>With that in mind, one of the key worries on the minds of investors today is the now ongoing Fed rate hike cycle. Just the past week, the Fed raised its benchmark rate by .25 basis points, the first increase in years. While not a major move, its significance was that rates are finally going up after years of talk, and that more hikes are on the way.</p> <p>This begs the question - how do stocks fare during rate hike cycles? Generally speaking, they do quite well. The reasons are multi-fold, but generally the Fed raises rates when economic times are good. So, even with rates going up, the broader positives behind the market's performance overshadow the rising rates. This is good for corporate America, and for stocks.</p> <p>Yet, this is not always the case. As we see today, inflation is running red hot, and hiking rates to cool inflation does not always work as intended. This can lead to stagflation, which is not good for the country, the economy, or stock markets. In addition, the Fed could also get too aggressive, raising rates by more, or a quicker pace, than they should. This can also spook markets and lead to lower returns. In sum, it should not be a complete surprise that returns during prior Fed rate hike cycles are a bit mixed:</p> <span><table> <tr> <td>Previous Rate Hike Cycles</td> <td>S&amp;P 500 Return</td> </tr> <tr> <td>May '83 - July '84</td> <td>(9.6%)</td> </tr> <tr> <td>March '88 - Feb '89</td> <td>6.8%</td> </tr> <tr> <td>Feb - '94 - Feb '95</td> <td>(2.1%)</td> </tr> <tr> <td>June '99 - May '00</td> <td>8.5%</td> </tr> <tr> <td>June '04 - June '06</td> <td>12%</td> </tr> <tr> <td>Dec '15 - Dec '18</td> <td>19%</td> </tr> </table></span> <p>Source: S&amp;P Historic Returns</p> <p>The takeaway here should be that returns <strong>can </strong>be strong, but they are also very mixed. We see a couple cycles where returns were negative, and others where returns were mild. Fortunately, the most recent cycles correlated with double-digit returns. That should give us some comfort now. Further, even when we account for the down cycles, we see the S&amp;P generates an average return of 6% during these time periods. Whether this is good or not depends on one's own objectives and outlook. While it is low enough for me to want to branch out and get more creative in some aspects, it is strong enough that I will continue to hold a good chunk of my assets in large-cap U.S. stocks.</p><div></div> <h2>Yield Curve Shows Recession Risk Ahead</h2> <p>Through this review, I have discussed a couple of reasons why buying now could be worthwhile. Some of this stems from the pessimism floating around the market. Like I said, while everyone else is euphoric, you want to be cautious, not the other way around. Yet, we should give some thought to the <em>why </em>behind why investors are feeling concerned. While buying during times of uncertainty can be profitable, we do not want to blindly ignore the risks facing the market either.</p> <p>In this respect - what are the risks? Chief among them is the potential for a recession. The likelihood of a retraction in economic growth is by no means small given all we are facing right now. These include war in Eastern Europe, continued supply-chain issues, the potential for rate hikes to slow business activity, and consumer sentiment that is falling broadly. All of these facts are combining to cause bond markets to price in an economic slowdown. Specifically, we have seen the yield curve invert, which often precedes a recession if we look at historical records:</p> <p><figure><span><img loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2022/3/20/10779721-16477811347182167.png\"/></span><figcaption><p>Yield Curve Inverted <span>(Yahoo Finance)</span></p></figcaption></figure></p> <p>While most, if not all, recessions are preceded by a yield curve inversion, not all yield curve inversions precede a recession. That is an important point because while this is an ominous warning, it is not a guarantee of impending trouble.</p> <p>My takeaway from this is it offers a continued reason to diversify away from U.S. stocks to some degree. A recession in one country does not always correlate to recessions elsewhere. This is why putting some percentage in stocks overseas can help smooth out overall portfolio volatility. Of course, this is a tricky climate, since developed markets in Europe are a normal go-to for U.S. investors. With the ongoing geo-political risks there, it makes central and even western Europe less attractive than normal.</p><div></div> <p>In this vein, I continue to see Canada and Australia as smart places to park cash, if one is looking outside U.S. borders. They are not overly exposed to Europe, similar to us, and they both are tied to assets that can perform well in inflationary environments (materials/metals in Australia) and (oil and gas in Canada). Furthermore, the funds I use to invest in these countries, the <a href=\"https://laohu8.com/S/EEME\">iShares</a> MSCI Canada ETF (EWC) and the <a href=\"https://laohu8.com/S/EGRW\">iShares</a> MSCI Australia ETF (EWA) are overweight the Financials sector. If rates go up in these nations, or even globally, then that is a tailwind for these funds. Given this dynamic and what I view as less political risks in these nations, they seem like reasonable U.S. alternatives to me.</p> <p>*I am long EWC and may buy EWA in the upcoming trading week.</p> <h2>The Consumer Is Looking Weaker</h2> <p>A final point right now is I will be monitoring the state of the U.S. consumer very closely in the months ahead. With inflation remaining a hot-button topic, American households are undoubtedly looking for ways to cut back. While inflation has been around for about a year and a half now, the acceleration from rising oil prices is finally starting to really dampen sentiment. The increase of prices at the pump is a daily reminder of how expensive every day goods are getting, and fuel prices are just not something we can ignore when we are driving around town:</p> <p><figure><picture> <img loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2022/3/20/10779721-16477869331539307.png\"/> </picture><figcaption><p>Gas Pump <span>(My camera)</span></p></figcaption></figure></p> <p>Despite unemployment dropping, wage gains, and a relatively elevated stock market, the impact of rising fuel, grocery, and other shopping bills is starting to hit home. With February retail sales data coming out last week, it should not be a surprise that the story was very mixed:</p> <p><figure><span><img loading=\"lazy\" src=\"https://static.seekingalpha.com/uploads/2022/3/20/10779721-16477870518843927.png\"/></span><figcaption><p>February Retail Sales Overview <span>(ABC News)</span></p></figcaption></figure></p><div></div> <p>From this point, I would suggest being less weighted towards retail/consumer discretionary plays at the moment. I personally hold the SPDR S&amp;P Retail ETF (XRT), but divested a portion of my holdings in favor of moving into the foreign holdings I mentioned above, as well as into Energy and Financials. While retail plays can often deliver strong returns, I don't see that environment playing out for the next few quarters as consumer wallets remain pinched. Until gas prices level, or wages go up more meaningfully, I am going to keep my U.S.-consumer exposure at a more modest level.</p> <p>*My personal consumer/retail holdings include XRT, at a position of roughly half where it started 2022 at.</p> <h2>Bottom-line</h2> <p>This is a difficult climate, with a worsening situation in Ukraine that is taking its toll on economic projections, supply-chains, and consumer sentiment. The end result has been elevated volatility, bearish investor sentiment, and softening retail sales. In truth, if Russia's ambitions begin to extend beyond Ukraine, it is unlikely markets are going higher. In fact, the thesis of buying now basically goes out the window. But if that situation is contained, or improved, I see the other headwinds facing the market as temporary.</p> <p>Investor sentiment is fickle, the American consumer has a long-term track record of resiliency, and volatility always fades with time. As a result, if one has the ability to put some cash to work now, I would certainly advocate doing so. But I would caution to remain diversified, fade U.S. consumer exposure, and go overweight the sectors that benefit from inflation and rising rates. These include commodities, Financials, Energy, as well as the countries that are more material-driven, such as Canada and Australia. My hope is that these ideas provide readers with some thought of where to look, and where to avoid, in what is sure to be an interesting Q2.</p>\n</body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Stocks Have Rebounded, But The Outlook Ahead Is Very Mixed</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nStocks Have Rebounded, But The Outlook Ahead Is Very Mixed\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-03-22 22:35 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4497000-stocks-rebounded-outlook-ahead-very-mixed><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>bowie15/iStock via Getty Images Main Thesis / Background The purpose of this article is to discuss the current state of the broader equity markets, with a primary focus on the opportunities in the U.S...</p>\n\n<a href=\"https://seekingalpha.com/article/4497000-stocks-rebounded-outlook-ahead-very-mixed\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"DIA":"道琼斯ETF","QQQ":"纳指100ETF","XRT":"零售指数ETF-SPDR标普","EWA":"澳大利亚ETF-iShares MSCI","BK4534":"瑞士信贷持仓","VOO":"Vanguard标普500ETF","BK4581":"高盛持仓","BK4559":"巴菲特持仓","EWC":"加拿大ETF-iShares MSCI","BK4582":"ESG ETF-MSCI","BK4561":"索罗斯持仓","BK4550":"红杉资本持仓","SSO":"两倍做多标普500ETF","VTI":"大盘指数ETF-Vanguard MSCI"},"source_url":"https://seekingalpha.com/article/4497000-stocks-rebounded-outlook-ahead-very-mixed","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2221406269","content_text":"bowie15/iStock via Getty Images Main Thesis / Background The purpose of this article is to discuss the current state of the broader equity markets, with a primary focus on the opportunities in the U.S. and elsewhere. We are in the middle of a difficult time to navigate, but the ongoing uncertainty from the violence in Europe, U.S. rate hikes, and inflation all present opportunities for long-term focused investors. Yes, more pain could be forthcoming, but buying when there is fear in the air typically makes for a rewarding experience (think 2020). While I do expect positive gains this year to be modest, investors can amplify those index returns by opportunistic buying. This was the case last week, and I expect similarly strong weeks in the months ahead. Of course, I do not see stocks going up in a straight line. I will continue to advocate having cash on hand to buy any forthcoming dips, which could mean taking some profit/reducing exposure when markets rebound. The point is to not be all-in or all-out of the market right now, but to capitalize when investors panic over what should turn out to be short-term risks. To be fair, I don't see the crisis in Europe de-escalating any time soon, but I also wouldn't suggest it will broadly expand and become a multi-year risk. That means buying in when actions over there spark market fears. It also means, above all, to remain diversified within sectors and across borders going forward. Volatility Is Elevated, Investors Are Bearish To begin, I want to touch on a few reasons why investors would want to be buying now. I look at this as a classic, \"buy when everyone is worried\" mentality. Of course, this strategy has risks of its own. It is very difficult to time a market bottom, and during periods of elevated volatility investors need to anticipate above-average drops (or increases) in the market, and the corresponding losses that could come with it. As a result, buying during times of uncertainty, while typically profitable, is not for the faint of heart, or for those who cannot withstand amplified swings to their portfolio balance. I mention this to manage expectations - as buying now is not for everyone. That said, one of the more time-tested ways to \"beat\" the market is to buy when people are fearful. This is a common adage, but one that bears repeating. The reason is that while it sounds obvious it is much more difficult to actually implement in practice. Psychology takes hold here, and investors who are currently feeling worried may not be so willing to buy, even if their education and training suggest they should. This brings me to my point that now could definitely be one of those times to start buying. While markets have indeed begun to rebound already, they are still off their recent highs. Further, volatility remains elevated, indicating to me that investors are continuing to bake a lot of fear and worry into current prices: VIX Index (Bloomberg) Again, this does not guarantee you will get a positive return if you buy here. Heightened volatility usually means the short term will be rocky. While I would suggest that over time positions now will eventually find their way in the green, the ride to get there may not be very smooth. Expanding on this point, we can look at another metric to suggest buying now could be a smart idea. Gauging investor sentiment is something I do on a weekly basis through the American Association of Individual Investors (AAII) sentiment survey. Using this, I try to be contrarian, buying when sentiment seems overly bullish, and vice versa. Looking back at the past few weeks, we have seen bearishness march markedly higher, despite markets finding some more solid footing: Investor Sentiment (AAII) These sentiment results help to speak for themselves on why buying when others are worried can make sense. Investors increased their bearish sentiment during a period when markets were moving higher:   Last Week Market Returns (Google Finance) Simply, when there is a lot to worry about, individual investors get nervous and refrain from buying. Unfortunately, this is precisely when you want to be buying, as last week's action indicates. There are always going to be macro-concerns, whether in the U.S. or abroad. But the key is finding those moments when worry seems exaggerated, and buy during those times. The past week is a good example, and I believe we will continue to see those opportunities in the weeks and months ahead. *For broad market exposure, I own the Vanguard S&P 500 Pacer Swan SOS Fund of Funds ETF|ETF (VOO) Vanguard Total Stock Market ETF (VTI), Invesco QQQ (QQQ), ProShares Ultra S&P500 (SSO), and the SPDR Dow Jones Industrial Average ETF (DIA). Historically, Fed Rate Hike Cycles Are Positive. But Not Always While I just suggested that buying now has merit, I am not blind to the risks we face right now. I am not making the argument that readers should go \"all-in\" or even get overly aggressive. I do think now is a smart time to add cash, especially if one had been profit taking at points throughout last year and this year. Adding during times of stress, volatility, and worry is smart, but we want to manage our expectations it will be a bumpy ride as well. There are very valid reasons why investors are nervous, and those should not be completely discounted when anticipating future returns. With that in mind, one of the key worries on the minds of investors today is the now ongoing Fed rate hike cycle. Just the past week, the Fed raised its benchmark rate by .25 basis points, the first increase in years. While not a major move, its significance was that rates are finally going up after years of talk, and that more hikes are on the way. This begs the question - how do stocks fare during rate hike cycles? Generally speaking, they do quite well. The reasons are multi-fold, but generally the Fed raises rates when economic times are good. So, even with rates going up, the broader positives behind the market's performance overshadow the rising rates. This is good for corporate America, and for stocks. Yet, this is not always the case. As we see today, inflation is running red hot, and hiking rates to cool inflation does not always work as intended. This can lead to stagflation, which is not good for the country, the economy, or stock markets. In addition, the Fed could also get too aggressive, raising rates by more, or a quicker pace, than they should. This can also spook markets and lead to lower returns. In sum, it should not be a complete surprise that returns during prior Fed rate hike cycles are a bit mixed:   Previous Rate Hike Cycles S&P 500 Return   May '83 - July '84 (9.6%)   March '88 - Feb '89 6.8%   Feb - '94 - Feb '95 (2.1%)   June '99 - May '00 8.5%   June '04 - June '06 12%   Dec '15 - Dec '18 19%   Source: S&P Historic Returns The takeaway here should be that returns can be strong, but they are also very mixed. We see a couple cycles where returns were negative, and others where returns were mild. Fortunately, the most recent cycles correlated with double-digit returns. That should give us some comfort now. Further, even when we account for the down cycles, we see the S&P generates an average return of 6% during these time periods. Whether this is good or not depends on one's own objectives and outlook. While it is low enough for me to want to branch out and get more creative in some aspects, it is strong enough that I will continue to hold a good chunk of my assets in large-cap U.S. stocks. Yield Curve Shows Recession Risk Ahead Through this review, I have discussed a couple of reasons why buying now could be worthwhile. Some of this stems from the pessimism floating around the market. Like I said, while everyone else is euphoric, you want to be cautious, not the other way around. Yet, we should give some thought to the why behind why investors are feeling concerned. While buying during times of uncertainty can be profitable, we do not want to blindly ignore the risks facing the market either. In this respect - what are the risks? Chief among them is the potential for a recession. The likelihood of a retraction in economic growth is by no means small given all we are facing right now. These include war in Eastern Europe, continued supply-chain issues, the potential for rate hikes to slow business activity, and consumer sentiment that is falling broadly. All of these facts are combining to cause bond markets to price in an economic slowdown. Specifically, we have seen the yield curve invert, which often precedes a recession if we look at historical records: Yield Curve Inverted (Yahoo Finance) While most, if not all, recessions are preceded by a yield curve inversion, not all yield curve inversions precede a recession. That is an important point because while this is an ominous warning, it is not a guarantee of impending trouble. My takeaway from this is it offers a continued reason to diversify away from U.S. stocks to some degree. A recession in one country does not always correlate to recessions elsewhere. This is why putting some percentage in stocks overseas can help smooth out overall portfolio volatility. Of course, this is a tricky climate, since developed markets in Europe are a normal go-to for U.S. investors. With the ongoing geo-political risks there, it makes central and even western Europe less attractive than normal. In this vein, I continue to see Canada and Australia as smart places to park cash, if one is looking outside U.S. borders. They are not overly exposed to Europe, similar to us, and they both are tied to assets that can perform well in inflationary environments (materials/metals in Australia) and (oil and gas in Canada). Furthermore, the funds I use to invest in these countries, the iShares MSCI Canada ETF (EWC) and the iShares MSCI Australia ETF (EWA) are overweight the Financials sector. If rates go up in these nations, or even globally, then that is a tailwind for these funds. Given this dynamic and what I view as less political risks in these nations, they seem like reasonable U.S. alternatives to me. *I am long EWC and may buy EWA in the upcoming trading week. The Consumer Is Looking Weaker A final point right now is I will be monitoring the state of the U.S. consumer very closely in the months ahead. With inflation remaining a hot-button topic, American households are undoubtedly looking for ways to cut back. While inflation has been around for about a year and a half now, the acceleration from rising oil prices is finally starting to really dampen sentiment. The increase of prices at the pump is a daily reminder of how expensive every day goods are getting, and fuel prices are just not something we can ignore when we are driving around town:   Gas Pump (My camera) Despite unemployment dropping, wage gains, and a relatively elevated stock market, the impact of rising fuel, grocery, and other shopping bills is starting to hit home. With February retail sales data coming out last week, it should not be a surprise that the story was very mixed: February Retail Sales Overview (ABC News) From this point, I would suggest being less weighted towards retail/consumer discretionary plays at the moment. I personally hold the SPDR S&P Retail ETF (XRT), but divested a portion of my holdings in favor of moving into the foreign holdings I mentioned above, as well as into Energy and Financials. While retail plays can often deliver strong returns, I don't see that environment playing out for the next few quarters as consumer wallets remain pinched. Until gas prices level, or wages go up more meaningfully, I am going to keep my U.S.-consumer exposure at a more modest level. *My personal consumer/retail holdings include XRT, at a position of roughly half where it started 2022 at. Bottom-line This is a difficult climate, with a worsening situation in Ukraine that is taking its toll on economic projections, supply-chains, and consumer sentiment. The end result has been elevated volatility, bearish investor sentiment, and softening retail sales. In truth, if Russia's ambitions begin to extend beyond Ukraine, it is unlikely markets are going higher. In fact, the thesis of buying now basically goes out the window. But if that situation is contained, or improved, I see the other headwinds facing the market as temporary. Investor sentiment is fickle, the American consumer has a long-term track record of resiliency, and volatility always fades with time. As a result, if one has the ability to put some cash to work now, I would certainly advocate doing so. But I would caution to remain diversified, fade U.S. consumer exposure, and go overweight the sectors that benefit from inflation and rising rates. These include commodities, Financials, Energy, as well as the countries that are more material-driven, such as Canada and Australia. My hope is that these ideas provide readers with some thought of where to look, and where to avoid, in what is sure to be an interesting Q2.","news_type":1},"isVote":1,"tweetType":1,"viewCount":62,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":9019746248,"gmtCreate":1648647435554,"gmtModify":1676534370754,"author":{"id":"4109220938329520","authorId":"4109220938329520","name":"nerp","avatar":"https://static.laohu8.com/default-avatar.jpg","crmLevel":3,"crmLevelSwitch":0,"followedFlag":false,"idStr":"4109220938329520","authorIdStr":"4109220938329520"},"themes":[],"htmlText":"<a href=\"https://ttm.financial/S/VOO\">$Vanguard S&amp;P 500 ETF(VOO)$</a>wow that's insane!!!!!","listText":"<a href=\"https://ttm.financial/S/VOO\">$Vanguard S&amp;P 500 ETF(VOO)$</a>wow that's insane!!!!!","text":"$Vanguard S&P 500 ETF(VOO)$wow that's insane!!!!!","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9019746248","isVote":1,"tweetType":1,"viewCount":29,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":9031967704,"gmtCreate":1646427222068,"gmtModify":1676534127711,"author":{"id":"4109220938329520","authorId":"4109220938329520","name":"nerp","avatar":"https://static.laohu8.com/default-avatar.jpg","crmLevel":3,"crmLevelSwitch":0,"followedFlag":false,"idStr":"4109220938329520","authorIdStr":"4109220938329520"},"themes":[],"htmlText":"<a href=\"https://ttm.financial/S/VOO\">$Vanguard S&amp;P 500 ETF(VOO)$</a>finally bought it!!!!!!!!!!!","listText":"<a href=\"https://ttm.financial/S/VOO\">$Vanguard S&amp;P 500 ETF(VOO)$</a>finally bought it!!!!!!!!!!!","text":"$Vanguard S&P 500 ETF(VOO)$finally bought it!!!!!!!!!!!","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":6,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9031967704","isVote":1,"tweetType":1,"viewCount":394,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0}],"defaultTab":"posts","isTTM":true}