It’s time for the December 2022 CPI report and I am expecting a pleasant surprise with inflation well down into the 6%-6.5% range. My optimism is based on much lower energy prices which are primarily due to Europe having a very mild winter so far. That brought down NatGas prices 45% in the past 3 months.
On Friday the 13th Q4 Earnings Season begins with many of the major banks reporting. I have mixed feelings about the expected results. On the one hand, 10-yr bond yields have been coming down substantially recently. Thus the banks should be benefitting significantly as they raised rates substantially as the 10-yr yields peaked and now with yields falling, their margins should be getting fatter.
On the other hand, what I don’t know is how it has affected total loan volumes. Judging by the fact they are laying off thousands of employees primarily in the consumer retail banking portions of their business I’d have to say business must be stagnating for the banks.
The Swiss Central Bank announced earlier in the week they lost $116 Billion in 2022. That is equal to about 18% of total Swiss national GDP. Most of the losses was due to foreign currency trading to support the Swiss Franc. It’s the most the Swiss have lost, ever, in terms of total losses and also as a % of GDP.
Net -Net, I think we will see a lot of volatility in the markets in the remainder of January beginning with a Thursday spike up, at least in the a.m. session.
I‘m preparing my buy lists for later this month as I am still encouraged by the price levels in the stock market. In particular, values in the top end stocks have gotten hit pretty hard this past month. Tesla, Amazon, Apple, AMD and Nvidia have all dropped very substantially relative to the S&P 500 and Nasdaq. Of the 100 largest market cap stocks only 13 still have P/E’s above 25.
Charts and Video
Industrials and Finance are still showing strength. Consumer Discretionary stocks were the strongest performing sectors so far this year.
Video
I certainly did not expect to stay out of the markets for the entire year in 2022. It’s the 1st time in my 40+ year of investing I stayed out an entire year.
In doing so however, I did manage to slay the SPiDeR substantially. I beat the S&P by 21% and Nasdaq by 33% in 2022. It just wasn’t very much fun.
Yes, the purchasing power of cash did decline with inflation, but nowhere close to 21%. In terms of purchasing power, I can now buy much larger quantities of the shares I had when I sold my positions. That softens the pain of not being actively in the markets.
Patience is a difficult art to learn and most investors think they have to be IN the markets 100% of the time. Not true at all, and Warren Buffet has $126 Billion in cash he still has not spent.
Let’s Go Get the Money
or at least keep what we have.
JimB