Market Update
Market Edge

Market Watch for the Week of April 17th, 2023

We advise remaining on the present course:
S&P 500 Index Funds
International Growth Fund
Cash (Money Markets)

Inflation. Interest Rate Hikes. Inflation. Bear Market. Inflation. Bank Crises. Inflation. Ukraine. Inflation…..well you get the picture.

No matter what news has been announced these past two years, inflation has always been around – if not in the forefront, then definitely somewhere in the picture. What is inflation really? What difference does it make or how does it affect all of us? What is it really?

It’s easy to throw the word around but in plain, easy-to-understand English, how are we affected? We must warn you; the following may not be pleasant to read. This is NOT meant to sell bad news or upset you. It is written to educate you and what the real world is about but more importantly, how does it all affect your corner of the world and what should you do?

As you have read these past months here, one of the indicators we follow in order to give the most accurate information and market outlooks is known as the CPI – the Consumer Price Index. If you were to look at the CPI these past 24 months, the cost of groceries, utilities and gas has increased by 20%! TWENTY PERCENT!! Although inflation has slowed from what’s known as a ‘year-over-year’ peak of 9.1% to 5%, that only gives a snapshot of the past year. The problem is this however – unless your income has increased by 20% - for example from $45,000 in 2021 to $54,000 currently - since April 2021 you are losing money. Big time.

If you are a margarine user for instance, you’ve seen the price jump by 54%. Ukraine is the world’s number one exporter of Sunflower oil, and we know that the Ukrainians have little time for growing Sunflowers at the moment. A 13-ounce tub of margarine has risen from around $3.25 to $5.00 in the past two years. Milk has risen by 19% and bread, again affected by the war in Ukraine, has gone up 21%.

Chicken prices have skyrocketed, much of that attributed to the cutting back of production during the pandemic, by 20%. Add to that problem avian flu which really hurt the egg-laying flocks of chickens and we can understand how the price has gone crazy.

Gas prices are averaging $3.60 a gallon presently and we don’t need to point out the rollercoaster the price of gas has been since the start of the war. The cost of gas, however, is up about 22% from two years ago. The price of semiconductors has driven up the price of cars (and let’s not even imagine what will happen to the semiconductor supply should China and Taiwan go at it) which are up by 19% since 2021. Additionally, car parts and a labor shortage has increased the price of car maintenance and repairs.

Airline prices have really taken off – up 36%!! Hotel prices up 31%.

Movies, concerts, and events? There up 9%.

The cost of coal and natural gas have been driven up due to the shortages of both. Electricity is up 21% and coal 26%.

Furniture? Up 16%. data shows an increase in rent by 20%.

A survey conducted by CNBC has found that 58% of Americans are living paycheck to paycheck and 70% feel financially stressed!

The reason that we’ve walked through these numbers is to ask you to consider that if you’ve not received at least a total increase in pay of 20% these last two years, you are falling behind. If you realized a return of 10% per year on your investments, regardless of whether your portfolio comprises individual stocks, mutual funds, or variable annuities or retirement accounts, you would have at least been near the even mark. But – have your accounts increased anywhere near that number? Most investors’ accounts have been down in the last two years. By double digits. Adding insult to injurie, many investors were just hoping to break even. Most have not done so. As a subscriber to GaneWisdom/Market Edge, you have been guided to the best course of action to take. By doing so since our inception last August your portfolio would be up by around 4.5%. Please view our previous posts located in the Archive section for validation of this (somewhat) unbelievable result.

As corporate earnings are now beginning to be reported, it is becoming more evident that we already are in a recession. The completely amazing realization is Wall Street’s lack of concern. This, we believe, is a dangerous, as well as ominous signal - think walking down an unlighted path oblivious to boulders, obstructions, or deep holes. If we were to apply the basic accepted definition of an economic recession – two straight quarters of contracting economic activity – then corporate earnings are in a recession. Many companies that comprise the S&P 500 are forecast to shrink by 6.8% as firms begin reporting financial results this week. Johnson and Johnson, Tesla, and Proctor and Gamble are just a few who will be releasing these results and although revenues have increased (+1.8% according to the market-data firm FactSet) profits are shrinking - a strong indication that costs are rising. This divergence between slowing sales and rising costs will weigh on Wall Street soon. This a given – believe us. You likely will see more immediate effects of this difference in the tech industry, materials companies, and energy producers. Very quickly after this occurs, employees of these industries will feel the effect, as well as the average consumer and last, but certainly not least, so will the Federal Reserve.

Now, on to the markets……….

The Dow ended the week at 33,886. In August, in our inaugural post, we advised transferring into Cash (Money Markets) due to our indicators suggesting a severe downturn in the market. When that announcement was made on August 21st, 2022, the Dow stood at 33,702. For those who ‘bought and held’ your investments, congratulations as you have now broken even! Our subscribers, as pointed out earlier, have realized about a 4.5% gain since then. Again, please refer to our past posts in the Archive section.

Friday the S&P 500 closed at 4,137. On 8/21/22 the S&P 500 stood at 4,228 so those who ‘bought and held’ larger Big Board stocks are not quite even yet. We saw a mid-week rally after data was released indicating that inflation was being handled correctly by the Feds. Hopefully, this trend will continue.

The Small-Cap markets remain near their bottom, however they managed to squeak out a small gain by week’s end. This is a divergent from the Large-Cap markets, which as we know, have been on a bit of a tear of late.

As we’ve acknowledged on these pages, the economy is poised for a recession, indeed the figures above indicate we are in one presently, yet investors seem totally oblivious. In fact, they are responding with what could be called a carefree attitude.

How then, does someone manage their investments in a more logical and informed way? The answer is by being – or becoming – a more educated investor. At GaneWisdom/Market Edge, our mission is to keep our subscribers abreast of the financial markets by using a multitude of indicators. Translating this information in easy-to-understand language to our subscribers is our stated intention. Instead of profiting in an up-trending market, then losing that profit (if not principal as well) and hoping to get back even, we use our proven method of money management to assist you in retaining profits. Unless you have the time, training, and temperament to discern the financial markets, it would be wise to seek out learned specialists to guide you. Once again, we encourage you to view our results as they speak for themselves.

If this Bear Market is indeed coming to an end as many ‘gurus’ have opined (we are not quite in that camp yet) we will certainly take advantage of it by keeping you informed. If/when the markets retreat, we will keep you informed of that as well with the added intention of keeping what you’ve earned and not having to struggle to make up losses to just break even. The best news is this – you manage your own money by making intelligent decisions! No commissions, no management fees, no minimum dollar amounts before ‘the Big Guys’ will even bother with you. YOU do this on your own!!

Despite our witnessing investments made by hope, luck, and emotions, we will continue to go against the tide by using our proven strategies, therefore we recommend that new subscribers not move money into our previously stated positions. This is due to the increase in prices and could negate any advantage, although possibly short-term, an investor could realize. For our subscribers who have positioned money into the following, we advise remaining on the present course:

S&P 500 Index Funds

International Growth Fund

Cash (Money Markets)

Use your comfort level to judge what is best suited for you based on your own unique circumstances. We encourage diversification by not placing everything in one category.

Please watch for our Mid-week Market Alerts should there be any.

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