The story of the week, the month, and likely the entirety of next year, is the Federal Reserve and the rest of the world’s central banks.
And with good reason! The Fed’s policy direction is the single most important thing driving the stock market right now.
But it’s not the only thing…
Two less-than-rosy numbers came out last week which contributed to the swan dive that closed out the week.
First was retail sales on Thursday. U.S. retail sales saw their biggest drop in 11 months in November, dropping 0.6% from October. Nine out of 13 categories were lower, including big-ticket items like autos and furniture — the things people tend to buy on credit.
One lousy month doesn’t make a trend. But it does suggest that the Fed’s rate hiking is working, as more expensive credit may be curtailing borrowing and spending.
Source: US Census Bureau
It also suggests that holiday shopping this year might be a flop … as several major retailers have been telegraphing for months. “Black Friday” doesn’t really mean the day after Thanksgiving today. It’s a loose concept for pre-Christmas sales, which now appear to start well before Halloween. And looking at the data, it appears that the bump in sales we might normally expect in November came in October instead.
Peter Lynch, legendary manager of the Fidelity Magellan fund and one of the most successful stock pickers in history, is famous for his advice to “invest in what you know.”
I’d take that a step further to “invest in what you see.” In your daily comings and goings, look at what people are actually doing. Are their shopping carts full? Do the parking lots in the mall have more or fewer cars than usual for this time of year? This may tell you a lot about what to expect once the post-Christmas earnings start rolling in.
Another thing we’re seeing is a lower-than-expected Purchasing Managers Index numbers out of the manufacturing and services sectors…
Both were expected to rebound from December after falling to their lowest levels since the COVID lockdown panic in November. But they fell more, against consensus expectations.
There’s a lot of nuance to be found in these reports, but in summary, they indicate that business conditions are worsening as we close out 2022, and the risk of recession is rising.
All this data comes during a seasonally bullish period for stocks … which clearly hasn’t manifested this holiday season.
We’ve been beating the drum in Banyan Edge for the past two weeks, warning of the potential for a recession and more market pain ahead.
But we’re also not recommending you hide your cash in Mason jars buried in the backyard. We view any turbulence ahead as a major opportunity. And speaking of that…
A Sneak Peak at This Week’s Insights
The big theme uniting all our gurus next week is energy — with each giving a unique take on how the new “Super Bull” in energy stocks will continue.
Tomorrow, Ian King will take a long-term look at the renewable energy sector. Renewables, alongside traditional energy markets, have seen a big boom in 2023. And Ian thinks the two rallies, seemingly distinct, are actually heavily interlinked…
Charles Mizrahi will do what he does best on Wednesday and give his take on the fundamentals for energy stocks and particularly oil stocks over the next five years. Charles believes that investors are seriously discounting the importance of fossil fuels in the global economy, and how long they’ll remain entrenched…
On Thursday, Mike Carr is giving his take on energy stock valuations. Despite the strong outperformance in 2022, many quality energy stocks are still wildly cheap from a valuation standpoint. If you think you missed the energy stock rally, don’t miss Mike’s take later this week…
And on Friday, Adam O’Dell will cap off the week with an important lesson for investors spoiled by the bull market of the 2010s. What worked last time probably won’t work this time. If you’ve been eyeing the big decline in tech stocks as a buying opportunity, do yourself a favor and hold off buying until you hear what Adam has to say.
But before we get to any of that…
Don’t Miss The Banyan Edge Podcast
After last week’s inaugural edition of The Banyan Edge Podcast, we’re following it up today with a deep dive into the Federal Reserve’s game plan.
I’m sitting down with Adam O’Dell, Mike Carr and Ian King to get their take and to hear how they plan to navigate their readers through what could be a really difficult stretch.
You won’t want to miss this, as the Fed’s policy in the next year is the single most important variable to the market’s direction.
You can expect that in your inbox at 5 p.m. Eastern today, but until then, send any questions you have for our experts to BanyanEdge@BanyanHill.com. We’ll answer your questions in the podcast’s Q&A section.
Chief Editor, The Banyan Edge
P.S. In case you missed it…
We’re about a week and change away from Adam O’Dell’s landmark oil presentation to cap off 2022.
He and his team have had their head down for weeks researching the best oil stocks to buy and hold as we enter an energy-dominant market in 2023 in beyond.
If you want the best shot at outperforming the market next year — even potentially sidestepping the bear market entirely — you’ll make a point to be there.