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Market Talk ⏪

Boy oh boy is this a HUGE week for the stock market.

• Has inflation officially PEAKED?

• If so, is inflation actually falling at a reasonable pace?

• How much will the Fed hike rates this week?

• Is the Fed poised to keep pushing well into 2023 or will we see a pause?

All major questions investors are looking to get answered in some form or fashion this week. Three of the four we will know, but the big one is that last question.

How long the Fed takes an aggressive approach or how quickly they choose to pause or pivot, has huge impacts on investors strategy going into 2023.

As I have continued to state in my weekly newsletters, I still believe the Fed will hike rates 50 basis points this week, although there is a growing number of economists that believe the Fed will stick to its 75 basis point plan yet again. That in my eyes would be a surprise to the markets, which could result in a sizable sell-off.

The economy continues to still be operating on solid footing as of two weeks ago when we saw strong payroll data that was well above estimates, but then this past week, we did begin to see an uptick in the unemployment rate. However, all eyes will be on CPI this week.

Speaking of unemployment, the Financial Times polled a group of leading academic economists regarding the peak unemployment rate and when that rate will come to fruition in terms of timing, and the majority agreed that 5.5% unemployment rate would hit by late 2023.

Source

Will so much riding on a simple CPI number this week, investors are left wondering what could save the market.

How about Santa Claus?

Like the regular Santa Claus, some believe and some don’t believe. However, I am speaking more about the so-called “Santa Claus rally, which covers the last five trading sessions of the year and the first two of the new year. The S&P 500 has been positive about 79% of the time during those days since 1928, with an average gain of roughly 1.7%.

Let’s hope, but even if we do get a year-end rally, I still believe 2023 will be grim at least through the first half of the year.

• Inflation will still remain high based on historical standards

• Rate hikes tend to take roughly 6+ months to work through the economy and we just went through a period of 375bps in hikes not including this weeks coming rate hike

• Valuations still remain inflated with sizable earnings revisions due at the start of the year

• Unemployment will continue to rise

• Signs of a weakening consumer are only getting stronger

These are a lot of headwinds for an economy to overcome, which is why I also believe we will dip into a recession. Now notice I used the word “dip” and that is because I believe it will be a mild to moderate recession, nothing deep like the ‘08 Great Recession.

The S&P 500 PE ratio is currently at 20.5x compared with a historical average of 15x.

In international news, we saw that OPEC plans to reduce their oil production ahead of the planned Russia sanctions. This obviously lowers their supply being added to the markets combined with the European Union’s decision to ban all imports of Russian seaborne crude.

Go Premium 📰

Last week, I announced that I would be adding a PREMIUM subscription to The Dividend Investor’s Edge for investors looking to increase their knowledge and get more in-depth information.

I am a passionate investor who recently went FULL TIME writing this newsletter, putting everything I have into the information I pass onto my subscribers.

Premium Subscribers pay ONLY $1 PER DAY or less for exclusive content such as:

• 2 Monthly Individual Stock Deep Dives

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• And More

I recently published my latest Deep Dive on The Home Depot (HD), which you can see here for a limited time before it goes behind the paywall.

Stratosphere.io is a great tool I am using to perform my research when studying for these Deep Dives. Here is a summary snapshot of what you can see when using the tool.

Give it a try!

If there is a specific stock you would like me to consider for a future Deep Dive, then send me an email at [email protected] and I would be happy to consider it.

US Markets 🇺🇸

Here is a performance summary for US Equities:

Here is a look at US Treasuries:

The Fear & Greed Index measures market sentiment based on the following seven factors: put/call ratios, junk bond demand, stock price breadth, market volatility, stock price strength, safe-haven demand, and market momentum.

When it comes to the Fear and Greed Index, we saw the markets turn red last week, pulling back roughly 3%, which also seent fear levels much higher across the investing community as we approach this crucial week. We went from extreme greed levels to now sitting at a neutral rating. Currently, the index has a reading of 53, which is not much change from the prior week reading of 75.

Source

Earnings on Deck 💰

The majority of the earnings season is behind us, but we did get earnings from dividend payers Costco (COST) and Broadcom (AVGO) last week. You can see the COST Earnings Recap report HERE.

Pretty quiet week in terms of earnings this week.

Source

Notable Analyst Updates 📝

• Deutsche Bank downgrades shares of Starbucks to hold from buy.

• Barclays increases PT on shares of Ulta Beauty to $548

• Morgan Stanley gives a DOUBLE upgrade to JPMorgan to buy from sell

• Bernstein gives a buy rating to shares of Costco

• Bernstein gives a buy rating to Target

• RBC increases PT on shares of to $120

• Citi rates the following defense contractors as buy: Lockheed Martin and General Dynamics

• Citi increases the PT on shares of 3M to $126 and increases PT of $Honeywell to $248

This Week 📆

Monday

• Federal Budget

Tuesday

• Federal Reserve begins 2-day meeting

• Consumer Price Index (CPI)

Wednesday

• Federal Reserve rate hike decision

• Fed Chair Jerome Powell briefing

Thursday

• Initial jobless claims

• Retail sales

• Industrial production

Friday

• S&P global manufacturing PMI

• S&P global services PMI

Other Resources 📺

If you have not done so yet, definitely check out my growing YouTube community where I publish weekly videos on Dividend Stocks I am looking at.

Here is a look at my latest video in which I discussed 3 Cheap REITs To Buy:

Also during the week, I did a video breaking down How To Start Investing Your FIRST $1,000.

Here are a few others of my latest videos:

The Power of Compounding Dividends | Dividend Snowball Effect

3 Monthly Paying Dividend Stocks

Better Buy: Apple or Microsoft

Warren Buffett’s Top 5 Dividend Stocks

10 REITs To Buy

Better Buy: Coke or Pepsi

Better Buy: Home Depot vs Lowe’s

Earn Dividends EVERY Month

5 FOREVER Dividend Stocks

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Have questions? You can email me directly at [email protected].

Have a Great Week!

Mark