We made it through the first quarter of 2022 and it was the worst performance for the various indexes and averages since 2020.
That is easy to explain with inflation, war in Ukraine and the Federal Reserve raising interest rates.
Of course though, investors aren’t focusing back but looking out two to three quarters ahead. There is where the debate rages as to the specter of recession.
I must point out that while the concern is justified, earnings reports continue to be strong.
There is a warning sign flashing red, which is the inversion of the yield curve.
That means that short-term yields are higher than long-term yields on Treasuries, which isn’t the norm.
It takes higher yields to get you to buy longer terms in most cases.
This indicator has been fairly accurate at predicting recessions.
This could become serious if this doesn’t correct itself in short order.
I would point out that inflation is going to be with us for some time.
Wages continue to rise as unemployment has moved down to 3.6%.
Last week a distribution center for Amazon voted to unionize.
There has been talk in DC that unions are necessary for worker’s wages to rise.
There is also concern that dividends and stock buybacks favor investors over employees.
The next Fed meeting will be in May and it appears that the next hike will be 50 basis points, followed by another 50-basis-point rise.
I don’t need to remind you of the impact of higher energy prices on everything.
As such, Chicken Little would be running.
You talk about your “wall of worry.”
The contra-argument is: where are you to go with your savings?
Some would argue Crypto, but billions were lost due to hacking.
I still look to dividends in quality companies. Another suggestion would be to buy the likes of Amazon or Apple that can pass on along higher costs.
You would have to look at Google, which essentially sells personal info.
Nothing, even precious metals, is guaranteed.
Just don’t let fear or greed drive you into a wreck.