Not exactly a fun week in the equities markets last week.
If your measure is the various indexes and averages, last week was the worst week since March of 2020 and have gone back to levels we visited in June of last year.
I am not going to say that this is the correction that I thought we would see in the latter part of the fourth quarter of 2021.
We will have Microsoft, Apple and Tesla reporting earnings this week along with the Fed meeting.
I will admit that back in March of 2020, to buying that dip.
I believed that we would overcome the government over reach and the market would come back as the economy was just too strong along with earnings.
I am not so sure today.
I don’t see a recession on the horizon but growth may move back toward 3.5%.
That is not bad, but it will not support the multiples that we recently experienced.
Earnings reports will be of maximum importance.
I am not sure it will drive the market higher but it will support the market.
There is just not way to get past the fact that price to earnings multiples have gotten a bit too rich.
They are way too rich for a value player like me.
For those of you looking to find an alternative, crypto currency hasn’t been kind of late.
Bitcoin has dropped from around 69,000 to 33,000 in less than a couple of months.
I would say though that should you believe that a recession is not on the horizon, looking overseas for value and dividends may be an option.
If you think earnings reports are over rated, just ask Netflix.
It got pounded last week after announcing that it was not expanding subscriptions at previous levels.
It lost well 10% of value in one day.
This is a simple mathematical equation where multiples have to have significantly higher earnings expectations or we are headed for the wood shed.
Does that mean that it is the end for companies like Netflix?
I seriously feel that is way overstating the situation.
Netflix has time and again proved doubters wrong much as Tesla has done.
I would say though that the competition in both those sectors is much heavier than only a couple of years ago.
These are the times that breaking news can really pull the underpinnings from beneath equities.
This can come not just from earnings but also from geopolitical.
We could have an invasion of Ukraine, Taiwan and conflicts between Israel and Iran.
That is just the short list.
None of these have really anything to do with earnings, but they do distract attention especially when markets are nervous anyway.
The real debate this week is should you buy on the dips like March of 2020 or are we headed toward a recession.
The Fed has yet to even raise interest rates a quarter of a point.
They will not meet again till March. Fear is what drives equities markets.
I may have been a month late but the fear is here and the question is whether it will remain.
