Friends
That was an ugly month. There’s really no other way to describe it. Stocks were down. Bonds were down. Gold was down. Crypto was down. April was the worst month for Nasdaq since 2008 (you remember the financial crisis). Sentiment is atrocious, the technicals are a mess, and the Fed is only just beginning its assault on inflation (and the economy might be collateral damage). Having said that, it would not surprise me to see another bear market rally develop at any moment given the oversold conditions and extreme negative sentiment. The problem with bear market rallies is, though they are fierce in nature, they don’t tend to last very long- as we saw in March. The headwinds that we have spoken of for months now aren’t dissipating any time soon. But the good news for long term investors is that valuations are more reasonable now and much of the fluff in the market has been taken out and shot. We’ve mentioned the high-flying names of 2020 and 2021 whose shares are now down more than 80% from their highs.
As for today, by the close the Dow Jones Industrial Average was down 939 points to finish the day at 32,977. The S&P 500 was down 155 points to close at 4,131. The Nasdaq Composite Index was down 536 points to close at 12,334. Gold was up $5 to trade at $1,897 per ounce, while oil was down $1.05 to trade at $104.31 per barrel WTI.
We get an FOMC meeting next week where the Fed is sure to at least announce a half a point Fed Funds rate hike. This reset of financial assets is painful, but necessary in the long-term scheme of things. When the pendulum swings to far to one side it is bound to swing back to the other. The Fed made money very available for a long time. Now they are taking the punch bowl away and markets need to reconcile with that. It will take some time, but we’ve been through moments of disruption before. We can handle this too.
Have a great weekend everyone.
