'Tis Only My Opinion!

May 2022 - Volume 42, Number 5

Batten down the hatches!

The U.S. stock markets did not have a good positive performance in April 2022 as every attempt to rally found a quick way to lose momentum. The economy in the 1st quarter turned negative and the FED decided to increase interest rates and reduce its balance sheet at a faster rate than previously expected.

Now that is a formula for a major economic downturn if I ever saw one.

As a result, the markets undercut the previous lows and major support is now a couple of thousand points lower for the NASDAQ at about 10500.  For the S&P 500, major support is almost a thousand points lower at the 3400 level.

Not a good combination for an over-heated market whose valuations were rich by almost any measure. The FANG stocks were showing lower results for the year as shown in the following table and were significantly below their highs.

With the market still showing relatively high P/E ratios, mymain worry is whether a liquidation event could drop the market quickly well below the next support levels.

Although some investors might look at bonds and/or savings accounts for yield and profits at this time, remember that cash is a position as is gold, silver and other commodities.  Real estate is also questionable as rates and taxes increase.

In this market, certain investors (speculators?) might play the short positions in futures but it is possible that those bets could be rendered useless by margin calls when the big boys change the rules to protect themselves.

Personally, I will stay clear of the crypto illusions and wait for the smoke to clear from the coming storm and conflagration.

Remember to:

Keep It Safe, Simple and Stay Focused!

But then 'Tis Only My Opinion!

Fred Richards
May 1, 2022


Corruptisima republica plurimae leges. [The more corrupt a republic, the more laws.] -- Tacitus, Annals III 27

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