Financial Focus: So, where are we now?
By Michael E. Russell
The world is in a complete state of flux. Wholesale prices are the highest in more than 40 years. Year over year the price of vegetables has risen 82%, grain prices 43%, meat and fish categories rose an average of 34%. Then there is energy! Home heating oil, diesel and gasoline rose 106%, 64% and 60% respectively.
As the war in Ukraine rages on, one major problem is that world food and energy supplies are threatened given the amount of crops, fertilizer and oil that come from that region.
As prices continue to rise, household income is being eaten up. Thus, discretionary spending is shrinking. There is a measure compiled by economist John Williams who utilizes a CPI methodology used 30 years ago by the Federal Reserve. This index, he states, shows that family income had to rise 17.4% from a year ago in order to have maintained last April’s standard of living. This is the highest increase since 1947, the year I was born. But it’s not my fault!!!
How do all of these numbers reflect in the stock market? Up to now, corporate margins have held up, some even making new highs. But, as we all know, pricing power isn’t infinite. Here are the market performance numbers as the Federal Reserve tries to put the brakes on inflation, something Chairman Powell and Fed Governors have done a very poor job with, at least, 10 months too late.
Down Jones — 5.9% YTD
S&P — 7.84% YTD
Nasdaq — 14.66% YTD
The trend for this market is clearly down, at least in the short term. What does this mean for investors? I believe it is time to reevaluate your portfolio’s. Those with a shorter term horizon should look at the utility sector, which has risen 6% YTD. Readers with a longer investment horizon would be wise to use a down market to add to core holdings. IBM, Qualcomm, Nvidia, Exxon Mobil and JPM have very strong balance sheets. Management teams at quality corporations have shown the ability to keep their focus on the bottom line.
AT&T is becoming a pure telecom play again. This 150-year-old company spun off Warner Brothers to Discovery. Investors should be happy with AT&T’s focus on wireless and broadband. If you look at the Nasdaq’s biggest percentage movers this month, pharmaceuticals and biotech firms have led the pack.
It is hard to recommend new purchases at the present time; however, it is no time to panic. Keep track of your holdings and keep in touch with your financial advisor.
During this holiest of holiday seasons, I pray for world peace and a healthy and happy year ahead.
Michael E. Russell retired after 40 years working for various Wall Street firms. All recommendations being made here are not guaranteed and may incur a loss of principal. The opinions and investment recommendations expressed in the column are the author’s own. TBR News Media does not endorse any specific investment advice and urges investors to consult with their financial advisor.
