Buy Exxon Mobil in "No landing" US economy.
Who could have predicted back in March that things will take a dip in April 2024.
Back then, everyday was a new test for the 3 Composite Indexes as they kept breaking new grounds, testing new limits.
In less than a month, the market has become worse off than it was. (see below)
How Did It Begin?
If you asked me, it started around 10 Apr 2024 when US’s March CPI inflation data was released. (see above)
This time round it came in much higher to the surprised of analysts.
Headline inflation (3.5%) was higher than analysts’ forecast (3.4%) and was definitely higher than February’s data (3.2%).
Initially Mr Powell tried his best to calm the market with his dovish remarks; while his team mates were more hawkish.
Eventually on 16 Apr 2024, Mr Powell had to concede that falling inflation has grind to a halt.
Indirectly hinting that current interest rate will remain elevated in the foreseeable future.
Evidently this did not sit well with Wall Street and they let known, by selling down - resulting in a plunge.
Other economic report out are reinforcing the same notion. (see below)
US March 2024 retail sales topped Wall Street analysts' expectations as consumers continued to spend despite a higher interest rate environment. (see above)
March numbers was 0.7% from a revised February data of 0.9% (vs original 0.6%).
March numbers is also 2nd consecutive monthly uptick in retail sales.
Strongly suggesting January's surprise -1.1% decrease was more an aberration than a trend.
Navigation in a Volatile Market.
Besides the latest Sale report, following reports and survey are reinforcing a “No landing” US economy: (see below)
US Q4 2023 GDP - healthy 3.4%.
Producer Price Index (March 2024) - rising 2.1%.
Non Farm payroll (March 2024) - rising 303,000.
If this is indeed the direction / scenario - how to invest in such volatile conditions ?
$Morgan Stanley(MS)$ Chief Investment officer - Mike Wilson has echoed the same “no landing” sentiments.
His 2 supporting evidences of “no landing”:
Recent surge in 10-year Treasury yields, that has spiked more than 20 basis points.
Fall in interest rate-sensitive areas like the small-cap Russell 2000 Index, by nearly -3% while the S&P 500 slipped less than -1%.
Where To Invest?
Where to park our hard earned monies?
Mr Wilson is of the view:
Cyclical leadership from sectors like (a) Energy (XLE), (b) Materials (XLB), and (c) Industrials (XLI) points to the market moving to a "no landing" scenario.
Preference will be for (1) large cap areas of the market that are underpriced for a better than expected growth regime, eg. Large cap Energy,
Energy Stocks.
Based on his recommendations, I have narrow down a handful of mega cap energy stocks for reference. (see below)
Topping the list is none other than $Exxon Mobil(XOM)$.
I have a Picked post on Exxon Mobil (click here ! to read.) out on 01 Mar 2024. Therefore I will not elaborate on its advantages.
Exxon Mobil has gained +15.89% YTD.
It bottomed on 22 Jan 2024 at $96.82 per share and has never looked back.
Between then and 17 Apr 2024 closing, the stock has gained an impressive +22.53%.
Demand for oil will remain strong as international route airlines continue to avoid Iranian airspace as a result of the kingdom’s 300 drones & missiles attack, launched on Sat, 13 Apr 2024. (see above)
Diversions will result in more oil being consumed as airplanes detour to circum-navigate that region instead of flying across it.
Airlines’ additional energy demand adds to Red Sea disruption (existing) that saw international shipping containers performed similar circum-navigation in Red Sea route due to stepped up Houthi attacks.
Will this lead to Energy stocks being the best investment come end 2024 ?
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Do you think the US economy will be in “No landing” status ?
Do you think Energy stock will be the star investment in Year 2024 ?
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vix and gold seem to be doing well today.. gdp and inflation. or did someone sneeze in the sandbox again?
We love Exxon ! Can’t wait for Trump Administration to return in 2025.
Looking forward to a soft landing
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