So much for the slogan to sell in May.
We started off May on a positive note.
Fed Chairman Powell spoke and indicated he saw no stag or rising inflation, which at least put talk of a rate increase later this year to bed.
Then we had good earnings reports from the tech sector from Apple to Amazon.
At the end of the week the jobs report came in lower than forecasted.
This sent markets speculating about how soon the Fed would cut rates.
This all ended with the S&P 500 climbing back over 5100.
It seems like April was just a 5% correction.
I am amazed all the talk about rate cuts when the real deal is, as always, earnings.
It seems like we like all the buzz more than the substance.
You only have to look at Warren Buffet and Berkshire Hathaway’s earnings climbing over 40% and that is with a loss on Paramount.
Some wanted to make news about Berkshire cutting its stake in Apple by over 10%, but Buffet acknowledged that by year end, Apple would be its biggest holding.
I am amazed when people can’t recognize investors taking a bit of money off the table from time to time.
It is never yours till you take it.
It is much easier on the heart to play with the house’s money.
Moreover, money managers don’t want stock to become too large a component of their portfolio.
It just seemed pure profit taking.
Berkshire has just short of $200 billion in cash.
What that tells you is that it has become hard to find anything resembling value.
Never lose sight of the fact that Berkshire actually looks to own companies, not just invest.
I am sure analysts are focusing on rate cuts, as there will be little but politics and world events on the news cycle for the near future, with most of earnings reports completed for this quarter.
It is just the belief that the real normal is zero-interest rates.
We have a whole generation that grew up under those conditions and assume that is normal.
They also for some reason tune out any debt concerns for the government.
If they think interest rates are a burden on the economy, I am amazed they cannot see what higher taxes will do.
Of course, the argument is that only the rich will have to pay more. That has never happened and is just a political smoke screen.
I suggest that the one thing investors should take from the last couple of weeks of earnings is that on the whole, the economy is doing well and companies are making money.
Moreover, consumers are still spending which I find remarkable, as I have cut back a bit.
It is not lost though that there are bumps in the road and you only have to look at Starbucks which really took a haircut last week.
This is as it should be.
Good earnings and good cash flow will be rewarded and losses will be punished.
On the negative side, at these levels, a bad earnings report can severely impact a company’s stock price.
As we move into summer, the creativity to produce anything meaningful to impact the markets will get truncated as more attention will shift to the elections in the fall.
That, on top of all the global problems, will be quite the distraction from earnings.
