The Weekend Edition # 46

Welcome to another issue of the Weekend Edition!

Thank you to all who’ve read and subscribed to the newsletter this week!

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Here’s what we cover this week:

• Market Recap - Blood in the Streets

• Macro - Retail Sales Tanking

• Earnings of Week - Key Metrics

• The Week Ahead - Economic & Earnings Calendar

• Closing Thoughts - Tough times ahead

Let’s dive in ⬇️

Market Recap - 13 Jun - 17 Jun, 2022

What a week it’s been. Not only are we in a bear market across the board, the news of aggressive rate increases doesn’t bode well for what’s coming next. Friday saw a slight upturn in the market but we’re still in very ugly territory with the majority of stocks still below their 200 day moving averages.

Year to date, $15 trillion has been wiped out from the stock and bond markets in the US. Other geographies are all under pressure with market declines across the board. And we may see it get worse, as the balance sheets in the US, UK, Europe and Japan are set to shrink by about $4 trillion by the end of 2023, reducing liquidity and increasing volatility across financial markets.

Commodities aren’t faring any better. WTI Crude Oil was down over 6% for the week. I still think the long-term thesis is for oil prices to remain at elevated levels given the lack of supply. Demand is yet to catch after the pandemic, and the lockdown in China is curbing much of that demand as well.

Soft commodities are also seeing a decline. Some of that has to do with the seasonal harvest and some of that has to do with farmers cutting back on costs and just rotating plantation.

The biggest news of the week was certainly the FOMC meeting and here’s a brief I wrote on it earlier this week.

Macro - Retail Sales Tanking

Apart from the historic FOMC announcement on Wednesday, we also got some important Retail Sales data earlier that day on June 15, 2022.

Month on Month, Retail Sales declined -0.30% from April to May, while still up YoY by 8.1%. Another point to note, is that the Retail Sales number for the previous month was actually revised downward from an increase of 0.9% (previously reported) to 0.7%. This is troubling.

A couple of weeks ago I wrote about the consumer getting weaker and this is yet another sign that we’re seeing weakness in the US economy. With inflation hitting multi-decade highs, it’s not surprise that consumers are cutting back on spending.

But, the question remains whether we are beginning to see signs of the “demand destruction” that the Fed is hoping to achieve.

Earnings of the Week

The Week Ahead - US Markets Closed on Monday Jun 20

Economic Calendar (time in ET)

Earnings Calendar

Closing Thoughts - Tough times ahead

Last week, my Closing Thoughts section was titled “tough week ahead” and was it ever. I take no pleasure in saying this but, we are in for tough times ahead. With Governments raising rates and reducing the size of their balance sheets in a desperate attempt to rein in inflation, it looks like we’re headed for a global recession.

Supply chains still haven’t eased to the point where they will have a meaningful impact on easing inflation and it’s quite likely that they will not until the end of the year, particularly with the lockdowns in China.

I still don’t think the market has found a bottom. QT just started on 15 June and we are yet to see any meaningful impact from it. With liquidity decreasing, the market will continue to remain volatile and tightening into a slowdown never bodes well for the stock market.

Here’s wishing you a happy weekend, and safe investing.

Sincerely yours,

Ayesha Tariq, CFA

There’s always a story behind the numbers

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None of the above is Investment Advice. I may or may not have positions in any of the stocks mentioned. I have no positions in any tickers mentioned as of the date of publication of this newsletter. I have no affiliation with any of the companies other than that mentioned here.