Sticky Notes

Estimated read time: 2 minutes and 10 seconds

In this week’s newsletter:

1. Market recap

2. Top holdings: what I am buying & selling

Market Recap

YTD returns:

• S&P 500: +7.41%

• Nasdaq: +17.37%

• Russell 2000: -1.16%

• US Dollar ($UUP): +1.04%

• Gold ($GLD): +10.12%

Consumer Price Index (inflation): 4.9% Actual, 5% Forecasted, 5% Prior

Let us rejoice! Inflation is now less than 5%!!

Isn’t it startling that Fed interest rate hikes to their highest levels in over a decade can’t bring down inflation to their beloved 2% target?

No wonder Powell hasn’t been hinting as pauses or cuts, the job ain’t done!

The type of inflation that we are currently seeing is often referred to as sticky inflation

In a sticky inflation environment, the prices of certain goods and services may rise more quickly than others, and the overall rate of inflation may be slower to respond to changes in economic conditions, such as changes in monetary policy or shifts in supply and demand.

This can create challenges for the Fed as they may need to take more aggressive measures to control inflation or stimulate economic growth…*cough* interest rate hikes

The chart above sums up sticky inflation nicely. The red lines show which sectors contributed to the peak CPI numbers of last year. Fuel is a large weight for the CPI, so the drastic RoC shift from this year to last is contributing the the CPI falling each month.

But all other sectors from food to shelter has only steadily decreased. In general, they still display a YoY reading that is very high compared to history.

In fact, shelter has INCREASED YoY…can’t afford a home? No problem, just have fun paying higher rent!

Surely that won’t be a problem with the strong US consumer….?

Yikes…so you’re telling me that wage growth is not pacing with inflation?

Therefore the consumer, the heartbeat of our economy, might spend & consume less goods and services because of this?

So GDP will fall, sequentially, as demand drops off?

I think you’re starting to get how the stars align here…

I just hope the Microsoft employees out there can afford their rent this year!

In The Account | my top holdings

1. GOLD - $GLD

   1. Did you know that Gold is closing in on an all-time high in value? And it’s our top holding? Ha, who could have predicted that!

2. BONDS

   1. $EDV, $TLT, $IIGD

3. UTILITIES, HEALTH CARE, LOW BETA

   1. This sectors continue to outperform the others….

On The Radar | positions I want to build / sizing up

1. NONE

Off The Grid | removed positions / short selling opportunities

1. INDUSTRIALS - $XLI

2. HIGH BETA - $SPHB

3. RETAIL - $XRT

4. ENERGY - $XOP

5. TECH - $XLK, $QQQ, $GOOGL, $TSLA, $NFLX

6. CRYPTO - $BITO, $MSTR

7. HIGH YIELD - $HYG

8. FINANCIALS - $XLF

*Note the re-rank of the short list*

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.