Hello from Bangkok, where I’m on assignment at the Fours Seasons Hotel…
Yeah, I know that sounds tough but hell someone has to do it.
For today’s update, I thought I’d recap on what happened to stocks last week. Then what are the big mover and shaker data drops for this week. And then I will look at how you might play this very tricky stock market right now.
For the local market, and the S&P/ASX 200 lost 86.9 points (or 1.17%) for the week to finish at 7,346.80. In the US, the S&P 500 lost 0.44% but the Nasdaq actually went up 0.45%.
That was a big effort considering the latest jobs, inflation and retail numbers all screamed that US inflation is not falling as fast as the Fed wants.
That should’ve KO’d tech stocks but they did OK.
Why? Because I think the longer-term believers, who think that interest rates will peak and tech/growth stocks will stage a comeback, are outweighing the short-term traders, who want to be sellers with that run of disappointing data.
So, data will be watched like a Labrador eyes off a sausage at a BBQ!
In the US, there’s:
• The Purchasing Managers Indexes
• Economic Growth
• Home sales
• And the inflation indicator the Fed looks at very closely called the PCE core deflator.
• The RBA minutes, will be a hot headline and will hint at how hard the big bank will be on interest rate worriers
• The wage price index, which is huge for inflation
• Business Investment & construction numbers as well.
To the movers and shakers for stocks and
first, the US data, especially the PCE inflation reading. Second, what our RBA has to say about interest rates, will affect interest-rate sensitive companies on the stock market, such as banks and retail businesses. It will also affect the $A.
But undoubtedly, stocks could surge or slump on that US inflation reading.
Fingers crossed it comes in better than expected but I say that with a lack of confidence.
How do you play the market now? I’m playing a long game and buying those companies that will spike when inflation falls enough to see central banks stop raising interest rates. It means I might get in early and cop a sell-off but I don’t expect a big dumping of stocks.
When central banks stop raising interest rates, that’s when tech stocks, growth stocks and small caps will have a big comeback.
It’s out there waiting to happen — you just have to be patient.