Stocks soured yesterday following the no-results-producing talks about the debt ceiling in Washington. New Home Sales unexpectedly jumped in April, a sign that buyers are turning to builders to fill the supply gap.
Do you get FOMO? Yes, FOMO, or Fear Of Missing Out. Don’t worry if you do because you are not alone. I have been doing this for over 3 decades and I still have to remind myself to think with my brain when considering jumping into the water as a massive storm builds on the horizon. It is hard to resist. The water looks so cool and soothing, and it appears that everyone… everyone in the water is having the times of their lives, and yet I sit on the shore… seemingly alone, the sun baking my shoulders, repeating to myself weird axioms like “no pain, no gain,” “no risk, no reward,” and “don’t be a wimp Marko, jump in!” And yet those storm clouds grow closer, darker, and angrier. Do you know that feeling? Sure, you do.
One of the easiest ways for me to identify a neophyte investor is to observe the velocity and volume of their activity. If you ask the investor what their strategy is, they will say something to the effect of “buy low and sell high.” Some of them would try and impress me and add “… or sell high and buy low,” and if they are really, really trying to get a rise out of me they might further add “and buy and sell options, because you get more bang for your buck.” Ok, Mark, deep breath 😖. Did you notice the common denominator amongst those three clauses? Yep, “buy” and “sell”. For some strange reason inexperienced folks believe that they always need to be buying and selling in order to make money. Of course, you DO have to be “in it to win it,” so to speak. But for professional investors, there is a little secret action besides “buy” or “sell”, and that is “DO NOTHING.” You might recognize that as “hold,” which is kind-of accurate. If you are long a stock and things get bumpy in the market, you may decide that the bumps will pass, that the company is still strong, and that the company is well positioned to provide strong long-term gains. You “hold.” Holding can also be applied to that large pile of cash sitting in a money market fund or in a coffee can on your kitchen shelf. You may be hearing great things about a stock, how AI is going to change the world, or how the Nasdaq is up by a ton. Meanwhile your cash is collecting dust. Do you have FOMO? You blame yourself for not jumping in before the rally, so you make a pact with yourself to “just do it,” and “make no excuses!”
In order to do that, however, you might have to filter out all the background chatter. Chatter like, chances of a recession have increased, cash deposits at regional banks continue to decrease, the Fed HAS NOT PIVOTED YET, markets may be overoptimistic about Fed cuts later this year, politicians seem hell-bent on setting fire to the US’s credit markets, even if a debt ceiling deal is reached that the Treasury will have to immediately sell massive amounts of bills to refill its coffers and cause rates to go higher, inflation remains really sticky… should I go on? These things are neither conjecture nor inconsequential. Indeed, markets, specifically growth stocks, have had a mighty, if not unexpectedly large run up year to date. Much of those gains were based on the assumption that the Fed will cut rates later this year. Additionally, if the US does enter a recession later in the year, cash-heavy tech companies, which have been cost-cutting and right-sizing, seem like good options for investment… in addition to the traditional recession beaters, health care, utilities, and consumer staples. However, if you throw in the debt ceiling issue which can send interest rates in either direction, far and fast, you may have to rethink your approach. With the Nasdaq up by +20%, the Dow off by a fraction, and the S&P up by about +8%, you might realize (if you are thoughtful) that there may be a better time to reach for that coffee can and load up on your favorite tech companies. To be clear, all these issues do not mean that growth stocks cannot rise even further, it just means that investors need to consider ALL the facts when deciding what to do. The correct way to assess this decision is ask yourself if the potential near-term gains are worth taking the risks that exist at the moment. The storm may blow over and all this worry may prove to have been for nought. The good news is that the cash in the coffee can will still be there tomorrow and your favorite stocks will still be there as well – you can buy when the clouds start to break. For today, you should remember that you have three choices, not just “buy” or “sell.” Stay patient stay focused.
WHAT’S SHAKIN’ THIS MORNIN’ ☀⛅🌧
Agilent Technologies (A) shares are lower by -9.44% in the premarket after the company announced beats on both EPS and Revenues but significantly lowered its full-year guidance. Current quarter guidance also came in below analysts’ estimates. The company blamed an “increasingly challenging market environment.” Dividend yield: 0.69%. Potential average analyst target upside: +13.1%.
VF Corp (VFC) shares are higher by +3.06% in the premarket after the company announced that it beat EPS and Revenue estimates by +20.65% and +0.46% respectively. The company provided full year guidance which would indicate a slight growth in year over year earnings. Yesterday the company closed at a 52-week low, and it is down by -31.29% year to date. The company has a short interest ratio of 3.27 days with 0.96% of its float.
YESTERDAY’S MARKETS 📈📉
Stocks sold off yesterday as debt ceiling talks hit a speed bump and a stronger than expected PMI lessened the likelihood of rate cuts later this year. The S&P500 fell by -1.12%, the Dow Jones Industrial Average slid by -0.69%, the Nasdaq Composite Index dropped by -1.26%, and the Russell 2000 Index declined by -0.43%. Bonds gained and 10-year Treasury Note yields slipped by -2 basis points to 3.69%. Cryptos gained by +1.41% and Bitcoin added +1.20%.
NEXT UP 👓
- FOMC Meeting Minutes from May 19th will be released at 2:00 PM Wall Street Time. This will be a market mover, so pay attention.
- Fed Governor Christopher Waller will speak today.
- After the closing bell earnings: NVIDIA, UiPath, Snowflake, and Splunk.
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