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Are We Coming In For a Soft or Hard Landing?

After a strong performance two weeks ago, major U.S. indices posted slight losses of about 1% last week. With the majority of first quarter earnings now posted, analysts and investors are focusing on whether the Fed can maneuver our economy to a much-desired “soft landing.” There are just about as many negatives as there are positives to consider.

The chart below is from Charles Schwab. It shows the CEO confidence has dropped significantly this year. with so many unknowns, it’s not surprising. JPMorgan Chase & Co. Chief Executive Officer, Jamie Dimon said this last week; “We just don’t know if it’s a minor one or a superstorm Sandy.” His comments echo the uncertainty many corporate executives feel. The current level of CEO confidence is low but typically has been lower heading into a recession (shaded bars).

I would expect the current situation of uncertainty to continue to plague the stock market for the foreseeable future. Rallies like we experienced a couple of weeks ago may be met with subsequent weeks of drifting lower. At this point, there is no consensus.

The Fed does have a tough job on their hands, but we know their goal is to provide a soft landing while attempting to tame inflation. This is why most analysts believe the market has already priced in the upcoming interest rate increases. The last thing the central bank wants is to surprise everyone by their actions. If you have any questions, please contact me.

 

The Markets and Economy

  • S. job openings remain at high levels. The Labor Department reported 11.4 million job openings in April, a slight decrease from the 11.9 million available jobs the month before. Demand for workers has exceeded the number of unemployed people looking for work for the past year. Meanwhile, employers added 390,000 jobs last month. This shows hiring is still robust as businesses continue to grow and fight the effects of inflation. Analysts had estimated 328,000 jobs for April. Hiring remained especially strong in the hospitality sector as hotels, restaurants and recreational businesses readied for the summer vacation season. Retailers, on the other hand, cut staff in May as they struggled with bloated inventories and high inflation costs.
  • Wages for S. workers are on the rise. Compensation in 2021 for the median worker at 275 companies represented in the S&P 500 index was higher than in 2019, before the pandemic. Employers still struggle to find workers as there are still over one million fewer jobs than pre-pandemic levels.
  • Lumber prices doubled during the pandemic as cooped-up Americans remolded their homes en masse. Now lumber futures are down 52% since the Fed started raising interest rates in March.
  • The number of ransomware attacks against S. businesses have increased this year, cybersecurity experts say. Many attacks are relatively unsophisticated and usually rely on human error. However, when skilled criminal organizations hack, they can demand tens of millions of dollars to unlock computer networks.
  • The unemployment rate in the K. dropped to 3.7% as of 3/31/2022. That was Britain’s lowest jobless rate since 1974.
  • Ford Motor Co. is planning to add thousands of jobs at plants in Ohio, Missouri and Michigan. In an effort to increase production, the car manufacturer will invest billions for factory retooling and hire 6,200 workers.
  • According to Fannie Mae, less than one-in-five Americans recently surveyed believe it is a good time to buy a home in today’s market.
  • OPEC announced plans to increase oil production by 50% due to energy constraints around the world. The announcement may be mostly symbolic as many OPEC members are already pumping at full capacity and cannot produce more.

 

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The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Consult your financial professional before making any investment decision. You cannot invest directly in an index. Past performance does not guarantee future results.

This newsletter was prepared by David M. Kover®. To unsubscribe from the Weekly Market Update please write us at 555 Eastport Centre Dr., Suite B, Valparaiso, IN 46383 or click this link: Unsubscribe .

Note: All figures exclude reinvested dividends (if any). Sources: Bloomberg, Dorsey Wright & Associates, Inc. and The Wall Street Journal. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

Securities offered through Triad Advisors, LLC, member FINRA/SIPC. Investment advice offered through Resources Investment Advisors, LLC, an SEC-registered investment adviser. Resources Investment Advisors. LLC and Vertical Financial Group are not affiliated with Triad Advisors, LLC.