- Capital Contrarian
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- Fed Mind Games
Estimated read time: 2 minutes and 51 seconds
In this week’s newsletter:
Market recap
Skills & data used this week
Top holdings: what I am buying & selling
Market Recap
YTD returns:
S&P 500: +7.73%
Nasdaq: +14.72%
Russell 2000: +12.73%
US Dollar ($UUP): -0.07%
Gold ($GLD): +2.25%
On Wednesday the Federal Reserve raised interest rates by 25 bps (this was expected)
For the first time in my life I actually set aside the time in my day to watch Powell speak. Here are my observations:
His speech AND answers to questions are all pre-written for him. Kind of a pussy move if you ask me...
Multiple reporters asked questions hinting at "rate cuts" or "pivots" - he actively dodged these questions and did not confirm this would happen
He reiterated, once again, their goal of returning to the benchmark 2% inflation (currently it's 6.4%)
One reporter literally asked "how are you doing?" with a general concern in their voice. Found that pretty funny because that guy literally knew how f***'ed we are because of the Fed's decision to continue raising interest rates into an economic slowdown.
Yes, I know the market ripped after this press conference & Thursday. Yes, I know January is off to one of the hottest starts in 20 years. Check out my next section for a reality check.
While Friday wasn't a "blood bath", it was pretty interesting to watch the market unfold after the jobs report was published.
"Jobs report shows increase of 517,000 in January, crushing estimates, as unemployment rate hit 53-year low" - CNBC
Holy SHIT.
Tip of the cap to all of you employed folks! What a booming economy!
Me to this jobs report:
A strong job's report basically gives Powell all of the confidence in the world NOT to cut rates.
Not to mention wage growth is still very, VERY high (that's a type of inflation, fyi)
In a strong labor market, upward pressure on wages can result in higher inflation, even without a significant increase in spending. The Fed may respond by raising interest rates to slow down the economy and prevent inflation from spiraling out of control. This can help to keep the economy on a sustainable path and ensure that price stability is maintained.
More jobs being added...interest rates continue to rise....demand slowing...margins pressured...
The ticking time bomb marches on.
Skills & Data Used This Week
Bear market bounces.
They're a byproduct of highly volatile markets; they catch people by surprise but more importantly drive severe anxiety for investors.
"The bottom must be in"
"Can't have FOMO, must buy this rally"
Let's take a look at some of the most recent bear market rallies for context:
Putting this latest rally into some perspective, it's actually pretty weak compared to the early 2000s.
If you are buying equities based on a moving average (like the 200 MDA blue line in the chart above) - be better
That's not an investment strategy. That's just an elementary school calculation that investors follow to "feel" something.
In The Account | my top holdings
METALS
Gold & Gold Miners - $GLD, $GDX
Silver - $SLV
Platinum - $PPLT
STAPLES - $XLP
Notice how I had health care and utilities last week and not this week? Signal broke and it broke bad. Bye bye for now.
CHINA
What a buying opportunity Friday was for $KWEB, $PDD, $CHIQ
On The Radar | positions I want to build / sizing up
BONDS
Off The Grid | removed positions / short selling opportunities
TECH - $XLK, $QQQ, $GOOGL, $TSLA
RETAIL - $XRT
HIGH BETA - $SPHB
CRYPTO - $BITO, $MSTR
HIGH YIELD - $HYG
Got smoked on the short end of Tech this week, but take a peep at some of their earnings and you tell me if the future looks bright...
Until next week....
-BW
DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.