(910) 319-7834
Growing up in Charlotte, North Carolina I spent many summer days at the Carowinds Amusement park. My favorite ride was the legendary Thunder Road, no spins, no loops, just a lot of hills and speed. On the first hill the cars would attach to the chain link and start rising. The anticipation would intensify as you approached the top of the hill. As the coaster started to go over the hill and accelerate your stomach would drop and the adrenaline would flow through your veins. The last 8 days this market has been giving me the same feeling. As of Thursday afternoon, the Dow Jones Industrial Average had 4 trading days with moves over .5% and three of those days had moves greater than 1.2%. Over the same period, the volatility of Nasdaq stocks has been greater; 4 days with a decline greater than 1.25% and 2 days with an increase greater than 1%.
Thursday, the S&P 500 was down 1.37% and the Nasdaq was down 2.27% as weakening economic data worried investors. Some posit that our Federal Reserve already missed the best opportunity for cutting rates. Of course, that is nothing more than speculation. Futures contracts on Friday morning pointed to another down day for nearly anything that trades.
Many of the Mega-Cap stocks reported earnings this week. Wednesday, Microsoft’s results missed expectations, sending the stock down in after-hours trading. However, positive results from the chipmaker AMD, helped the markets rally on Thursday. Microsoft regained much of what it lost in the prior session. After the close on Thursday, Amazon and Apple reported less-than-stellar earnings. The excitement and euphoria in the Artificial Intelligence trade, better known as AI, has lost its momentum. At the top of that list is Nvidia, now trading 25.5% below its June high. Microsoft, Apple, Dell, and Broadcom had a similar fate. The tech-heavy S&P 500 dropped 4% since its July 16th high, while the S&P 500 equally weighed has only retraced 1.1% in the same time frame.
Though some of the Mega Cap tech stocks have disappointed, overall earnings have been positive, and that’s a good thing. Since the beginning of earnings season, 376 of the S&P 500 companies have reported and 79.2% have beaten expectations. Only 16% reported disappointing earnings.
Friday morning data brought more challenging news, U.S. hiring slowed more than forecasted in July and the unemployment rate rose to the highest level in nearly three years. This makes it clear that the labor market is cooling faster than many believe. What does all this mean? I am confident that we will see rates move lower in September, and the Federal Reserve could surprise everyone with something over their standard .25 basis point cut.
If anyone doubted that our economy was slowing, plenty of proof has become clear. These conditions make stock selection and proper diversification crucial. Our allocation to commodities, such as Gold and Silver, has proven a good hedge. Further, our covered call strategy provides additional downside protection and cash flow. While we wait out some of the heightened volatility, we are taking advantage of 5% money market yields, while it lasts. If you have questions or concerns, we are here and always ready to help.
Have a wonderful weekend.
Roger Fuller
