In his Daily Market Notes report to investors, while commenting on the Fed, Louis Navellier wrote:
Impacts Uncertain
The Fed begins to shrink its balance sheet, and its impact is uncertain.
Positive results from Salesforce (NYSE:CRM) and HP (NYSE:HPQ) renewed confidence in business spending and June opened this morning on a positive note, but not with a lot of momentum.
Hedge Funds Still In These Growth Stocks Gave Up All The Returns They Generated Since 2014
Many investors have a habit of tracking the stocks their favorite hedge fund managers buy and then effectively copying their portfolio as best they can. However, equity hedge funds have had the worst start to a year ever recorded, with an average 9% decline for the first quarter. An analysis of what hedge funds are Read More
Q1 2022 hedge fund letters, conferences and more
The Elephant In The Room
The elephant in the room is that today the Fed begins to reduce its $9 trillion balance sheet, something the market has very little experience with. The plan is to start with $47.5 billion a month for 3 months, and then increase the amount to $95 billion. These are much higher numbers than we saw in 2017. During the pandemic, they were adding $120B a month, $80B in Treasuries & $40B in mortgages.
The upward pressure on longer-term U.S. Treasury rates and mortgage rates remains uncertain. Mortgage demand has already fallen to the lowest level since 2018 and housing inventory has jumped a huge 9% in a month, although home prices still remain a record 20% higher year-over-year.
This morning, we saw some slightly weak economic statistics, such as the S&P Global U.S. Mfg PMI which came in at 57.0 versus the 57.3 estimate, with prices up slightly higher than forecast. JOLTs job openings remain at a very high 11.4 million, hardly the conditions for a recession.
Energy/Commodity Tailwinds
The primary risk is stagflation with persistent high inflation, even if it has already peaked, with an economic slowdown due to higher prices and the Fed engineered higher interest rates.
The solution remains to find companies that can grow earnings faster than inflation. For now, the best prospects remain in energy and commodities, which have the wind at their backs.
Coffee Beans
The combined economic effect of an EU import stop of Russian oil is significant, despite China being the largest recipient of Russian oil by a large margin. The ban would eliminate 90 percent of Russia’s oil imports to the EU. Russia had been delivering 27 percent of the EU’s imported oil and was receiving roughly €400 billion a year from member countries. Source: Statista. See the full story here.
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