It's May Already?
Equities start the day higher as May begins! Can you believe it’s May already, how is that even possible? The phrase “the days go slow but the years fly by” couldn’t be more true (especially if you have kids). April though…WOW. Was that the best April of all time? Maybe, maybe not, but for pop culture it’s definitely in the running. Avengers Endgame plus the Battle of Winterfell? Forget about it. How much longer do I have to wait before I can spoil people on those two things? I’ll give you until Monday of next week before I fill this blog with references to how awesome fat Thor was and how boring Bran is. Ok, here is what we got for index returns in April: SPX +2.8%, Nasd Comp +3.4%, Rus2k +2.3%. The YTD returns are even meatier: SPX +17.5%, Nasd Comp +22%, Rus2k +18%. Stock Market Returns ASSEMBLE. Those are the best starts to the year in decades BUT (there’s always a but isn’t there) we need to start nitpicking. When our Thor takes the hammer from the past does that mean the Thor in that timeline…arrghh…man I wanna talk these movies so badly with you…focus Antonelli. While the market is currently trading at all-time highs there are things that are bothersome right now. My partner Willie points out that the # of stocks making new highs, while the market is making new highs, isn’t expanding like it did in previous breakouts. We’ve also got our eyes on optimism which is starting to surge. Not only that, we’re heading into one of the weakest 6 month stretches for the market (h/t RyanDetrick) so the conditions necessary for a correction are starting to add up. Look, when a market becomes overloved and the foundation it’s built upon isn’t all that strong a casual swipe from a Valryian blade can bring it down (I may need to buy this for my office). Now I’m not saying a correction HAS to happen but we need to be vigilant after such a strong move.
Lots of cross currents today between a Fed meeting and ongoing earnings. Apple said they experienced their worst ever drop in iPhone sales so the stock must’ve gotten killed right? Nope, +6% because people are starting to focus on their services (20% of revs, 33% of gross profit). How about this tidbit? AAPL trades at a lower PE than Proctor and Gamble (18 vs 25). Hey…here’s a question for you…do we need FAANG to rally for the market to rally? I argue no because FAANG is the product of a different era. Does anyone talk about PIIGS, The Nifty 50 or The 4 Horsemen anymore? Of course not. These companies all face their own idiosyncratic risks now, they aren’t bundled together in one giant acronym anymore. Which is FINE, we still want Tech to do well, we still want these companies to do well, all I’m saying is we don’t need the 5 names in FAANG to lead us anymore. In fact my good friends at Strategas have been monitoring the move in Financials which we’d LOVE to see lead.
The Fed announcement was basically inline with what the market expected but they did worry about inflation being a bit below their target. We churned up and down around the event but ultimately the Fed is being patient with rates and only time will tell if that’s the right stance. Nitpicking…you’re gonna see a lot of it over the next few months. We started the year 4 for 4 (every month has been positive) which has happened 15 times since 1950. Let’s end with this chart (also from my crew at Strategas) showing what happened in those years. Notice that every single one of them had some kind of drawdown averaging about -8%. We need to nitpick the market for signs of vulnerability; nothing goes up in a straight line other than my waist size.
- Instagram is the new mall! “Ever since Instagram first allowed brands to make shoppable posts, consumers have been asking for the same from influencers—from whom, after all, most Instagram users are getting their product recommendations. Now they’ll finally be able to buy everything their favorite creators recommend directly through their feed. Instagram will take a cut of every sale made through its platform, likely generating millions in new revenue” Here’s a question for you…what do you think is more valuable right now: A generic college degree or 150k followers in Insta? I think I know the answer…
- Really interesting tidbits in this article about advisors targeting younger clients
- Housel on the mind tricks we play on ourselves: “This is so powerful in investing.“The easy money has already been made” is only said by people who can’t remember how hard and uncertain it was to make money in the past. And those who think investing will be easy if you just have a long-term mindset ignore that the long run is just a collection of short runs, each of which has uncertainty, volatility, and decisions that have to be dealt with.”
- Volatility is actually your friend. This is an impt subject, I always try and relay this to our clients when I speak to them: For most individual investors, the real risk is not saving enough and not having it grow enough to cover future expenses during retirement. If running out of money is the true risk, then anything you do today that reduces your probability of growing your nest egg is causing that risk.
- Take a look at the average credit score in America (via FICO). The really bad recessions come when people are way over their skis with leverage / debt. Does the average American strike you as way over their skis with a score like this? (article here)
- Is this the most useless device ever? Does anyone need one of these?
- Speaking of needing, I need these ASAP
- Im quitting and becoming Spider Man
- If you aren’t listening to the Michael Lewis podcast I don’t even know what to tell you. Start with this one
- Headlines we DON’T WANNA SEE EVER “Major Wall Street banks are telling clients to be ready for a sudden rip higher in the market”
We’ll end tonight on some everyday trick shots from Dude Perfect. Next time I’m in COST with my wife I’m gonna try that cheese puff one not only because it looks cool but I’m dying for a giant container of cheese puffs.
Have a good night