Just in case you were off vacationing and missed the financial news, last Friday was not a lot of fun.
It was the worst down day since May.
We dropped over 4% loss for the various averages and indexes in one day.
It simply reversed the recent over 20% move up from the June lows.
The loss was attributed to Fed Chairman Powell’s hawkish comments about inflation and the Fed
continuing to raise interest rates.
I find it hard to believe that the various analysts were believing that the Fed would slow down raising rates and then sooner than later drop rates.
It almost reminds me of rooting for the Houston Texans, as it totally defies logic.
One should note that the price-to-earnings multiple is now closer to 20 where it had been over 23.
I am not a big fan of P/E ratios, but it does at least point to some contention that stocks were overpriced.
Some of the hardest hit stocks Friday were the beloved FANG stocks, along with Microsoft. This is where you find the 4% drop.
It does bother me that essentially a handful of stocks have so much impact on the markets.
I would say though that we are back to testing whether the S&P 500 stock-index will get to 4400 or retreat to 3600.
There were some back in early June who were forecasting a visit to 3200 or lower.
Friday had a big impact on the bond market as Treasuries climbed back above 3% as it became clear that the Fed will add another three quarters of a point rise in the Fed Funds Rate in mid September.
I never saw the Fed having any other choice. I am grateful to not to have to take out an equity loan against my house to put fuel in my vehicle but it is still not cheap.
I won’t even go into the cost of groceries. I am amazed that prices haven’t been higher than they are at my local HEB. I would note to you though that the cost of home ownership is almost unbearable - shown by the lack of apartments and the rise in rents.
I have a contractor friend who is building his own house and he told me that his cost per square foot is over $250.
Some ask what can be done to halt inflation. My definition is that when we come to the realization that what we want is not what we need and we cut back to only what we need.
Rising interest rates is a real factor as it becomes more expensive to borrow.
So the big question now is where are we going from here.
Back down or pause and then up again.
I suspect there is a bit more of a downward move.
I am still not one buying a recession with such low unemployment.
I would say that hiring is starting to get curtailed a bit.
Take faith that nothing goes up or down in a straight line.
It keeps the buyers and sellers interested that way.
