Last week, the Fed raised interest rates again, while telegraphing that they expect this hike to be the last one for this interest rate hiking cycle, bank stocks crashed again, and stock market bulls piled even more money into AAPL and MSFT, helping to push up the S&P 500.
Check out the regional bank stock ETF IAT and you can see how the regional banking sector took a new leg down last week.
Active stock traders ignored this action and focused on AAPL.
Apple had earnings last week, beat purposely low analyst estimates, and announced growing earnings and revenue, however if you think about it too much you might realize that their revenue growth of the past few years is actually less than the rate of annualized inflation.
So, is it still truly a growth stock?
It trades with a P/E of 28 so it is priced like one.
That question doesn’t matter as long as the market is rallying and AAPL and a few big cap tech stocks are the way for the bulls to play it and buy into the market ahead of the day when the Fed actually announces that they are not raising rates – the “Fed pivot” event.
MSFT made a new high on Friday.
When you combine AAPL and MSFT market capitalizations they make up 14% of the entire S&P 500.
Really, not much changed in regards to overall market conditions last week. However, with the Fed at the peak of this rate hiking cycle you may want to run out and buy some CD’s to lock in the current yields.
As far as investing now goes, my thoughts are that what is important isn’t this week’s action, but the fact that Fed Fund futures market are currently predicting interest rate cuts before the end of this year.
That’s not really bullish for the markets if it were to happen, because it would take a recession in the economy or more financial instability like we saw in March to force the Federal Reserve to do that.
The Fed Fund futures futures can change and be wrong today too, but they have been priced this way for over six weeks.
I think all this means it is best to be cautious on taking big risks in these markets.
I think what the stock market does here could be considered a coin flip from a risk to reward standpoint, and that’s why I like the idea of thinking more about guaranteed returns from short-term CD’s and Treasury bonds and using gold as an inflation hedge – (WHICH BITCOIN DOES NOT DO).
Gold and silver had another nice run last week and have been outperforming the S&P 500 for 17 months now.
I liked buying stocks in the October-January period when they were lower – now I don’t – not at these levels.
This puts me in a bad position, though, as far as being a market commentator goes because people want buy ideas now. They don’t want someone saying I don’t think now is a time to buy. So, I’m doing fewer updates, spreading them out a bit in time. People can get free trading ideas every night from CNBC’s “Fast Money Show” or listen to Cathie Wood on Youtube tell them that the market is going to completely boom from now on thanks to new technologies, like she told them all throughout 2022 as the market went lower and lower. Those doing short-term trading in the market now have already forgotten about that bear market and only want to chase the short-term market action. Any Youtube videos that don’t align with that desire get sidelined by their algorithms. That’s why Cathie Wood remains one of the most watched market gurus on there, despite the performance of her blasphemous ARKK fund. One of the top rated shows on the “History Channel” is about searching for big foot. Internet people hear what they want believe and so Apple is a growth stock.
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-Mike
