US Stock Market - How To Invest In It Now ? Tough !
US Fed's 10th and latest Interest Hike.
I had assumed with the latest Fed’s interest hike cast in stone as per Wall Street’s factoring; US market will become buoyant and not fall further.
Guessed it was a one-sided wishful thinking on my part.
By the time market closed, both DJIA and S&P 500 have lost grounds while Nasdaq’s performance was flat. VIX index was at an all time high of +2.73%.
US market lost momentum after the Fed’s press conference where Fed chairman, Mr. Powell kept Fed’s options open-ended.
And they should and need to.
Why should the Fed be painted into a corner now, when:
Recession has not return to the target 2%?
It is trying to “protect & preserve” - (a) US economy and (b) US stock market. In my previous post I have mentioned all “side effects” US will suffer if inflation is not brought under control (click here to read !).
Contagion in the US regional bank sector seemed to have enlarged further despite $JPMorgan Chase(JPM)$ ’s unprecedented bailout of $First Republic Bank(FRCB)$.
Other unforeseen crippling factors in the horizon.
Quarterly Earnings & Stocks Performance So Far.
(1) Semiconductors.
Referencing both TSM and AMD latest quarterly earnings (that came in “mixed”) and their Q2 2023 outlook (that don’t look “bright”) I think the semiconductor sector is gradually giving up the +30% YTD gains.
(2) Energy - Oil.
On 01 May 2023, OPEC+ members have commenced their “self imposed” 1.15 Million bpd oil output reduction; as announced a month earlier on Sun, 02 Apr.
Logically, oil prices should be reacting to the restriction implementation and rise further.
Interestingly oil price dipped below $70 instead.
(3) Banks.
The fate that befalls of US regional banks continues to unravel even after collapsed First Republic bank has been bought by US #1 bank - JP Morgan; in an attempt to stem the contagion.
This came about, after the $30 Billion “rescue” injection by US bigger banks (banded together) failed to arrest the continual outflow of funds and FRC’s stock price plunge.
US Regional Bank Index has fallen by -33% in last 6 months
Even Mr Powell thought it was worth a mention during Wed, 3 May FOMC press conference.
In summary, US banking sector (to me) is one big toxic sector to stay away for now until the coast is clear; perhaps 6 months down the road ?
(4) Technology
Apart from $Microsoft(MSFT)$ and $Meta Platforms, Inc.(META)$ that have reported “better” quarterly earnings, other tech giants (Amazon, Netflix, Google) earnings have been “mixed” so far.
Similarly besides Microsoft & Meta Platform stock prices reaching “new” heights, others have languished.
With the latest round of interest hike, the compounding effects on the cost of doing businesses will be taking its toll in the following weeks & months.
Pink Floyd’s album “Lost For Words” sums up how I am feeling at the moment.
So far the homework that I have done diligently centred around the above sectors.
With all of them performing subpar at the moment, I am “lost momentarily”.
I will definitely need sometime to gather my thoughts and re-group to see what I will need to do in the coming months.
Would you agree it is better to “miss out” on a few opportunities than to “mis-invest” due to FOMO ?
Do you think Bank stocks are still worthy of investment now ?
Do you think the US market is still ripe for investment now ?
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Divd Stock as long term Portfolio and need to wait years for breakeven should you feel that price is good now. Investing is what we look at instead of speculating.
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It’s really hard to say as the hike rate is still on the way.
Another wave of risk from other sectors may come soon.
And we need to take care on risk from the bank sector now.
So the market is on the downside now.