High Anxiety
Investors grappled with several conflicting events last week. Given the negative sentiment in today’s environment, the market latched on to the glass-half-empty scenario.
On a favorable note, retail sales compiled by the U.S. Census Bureau were strong in April. And it wasn’t simply April. Numbers have been strong this year despite rising prices. So far, the consumer hasn’t rolled over.
We don’t like higher prices. But for the most part, we complain as we buy. In fact, when the report was released on Tuesday, there was some chatter that the consumer might be too strong.
But a day later, investors were wrestling with weak numbers from two large retailers.
Walmart (WMT $119) and Target (TGT $155) released gloomy Q1 numbers last week. According to CNBC, both companies posted better-than-expected sales.
However, both companies missed analyst earnings’ forecasts by a wide margin. Part of it was supply chain, but sharply higher transportation costs played a big role.
Two large retailers couldn’t completely pass along higher costs and were forced to partially absorb high prices for fuel and freight. Moreover, investors began to fret that rising costs could force additional downside earnings surprises at other firms.
Fed Chief Powell also commented to the Wall Street Journal last week that we need to see “inflation coming down in a clear and convincing way (my emphasis), and we’re going to keep pushing until we see that.”
As the graphic illustrates, pullbacks are a normal part of investing. In most years, the S&P 500 Index advances.
Volatility may be rooted in different conditions, but it is not unusual. We can’t predict a bottom, but as we’ve seen in the past, investors attempt to anticipate future events. When the news improves, stocks have usually already reacted.
If you have any questions or would like to discuss any other matters, please let me know.
Clark S. Bellin, CIMA®, CPWA®, CEPA
President & Financial Advisor, Bellwether Wealth
402-476-8844 cbellin@bellww.com
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1 The Dow Jones Industrial Average is an unmanaged index of 30 major companies which cannot be invested into directly. Past performance does not guarantee future results.
2 The NASDAQ Composite is an unmanaged index of companies which cannot be invested into directly. Past performance does not guarantee future results.
3 The S&P 500 Index is an unmanaged index of 500 larger companies which cannot be invested into directly. Past performance does not guarantee future results.
4 The Global Dow is an unmanaged index composed of stocks of 150 top companies. It cannot be invested into directly. Past performance does not guarantee future results.
5 CME Group front-month contract; Prices can and do vary; past performance does not guarantee future results.
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