Market Update - Nice Rebound Off Bear Market Low (so far?)

 As of Friday's close, the Nasdaq and Wilshire 2000 small cap indexes remain in bear markets while the S&P 500 has rallied off its bear market low back into "correction" territory while the Dow never reached the 20% down bear market threshold.

Interest rates have come down some but gasoline prices in some parts of California are OVER $7.00 a gallon!

S&P 500 Observation:  Note how the recent 20.9% "bear market correction" kept the S&P 500 contained by the channel made by the much quicker, 35.3% COVID-19 bear market in 2020. 

Market Update for May 27, 2022

Interest Rates:  After spending some time above 3.00%, the 30-year and 10-year Treasury Bonds are now back below 3.00, perhaps an indication that inflation has peaked and the US economic growth is slowing, i.e. GDP growth is falling.

US Treasury Interest Rates Graph

CPI vs Expected Inflation Rate

Average Gasoline Prices in the US

Gasoline Prices are higher here in California with many stations over $7 per gallon!

Link to AAA Gas Price Map

Sentiment Charts:

"Nasdaq New Highs - New Lows" 

CPC - Put:Call Ratio

Graph of the American Association of Individual Investors (AAII) Bulls Minus Bears Sentiment Indicator vs the Dow.

CNN Fear & Greed Index

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Record Gasoline Prices Still Rising with California Over $6 per Gallon and No Relief In Sight

We are seeing record gasoline prices with Californians paying over $6 a gallon on average for regular gasoline. The San Jose Mercury News said there is "no relief in sight" either while others say prices could reach $10 this year!

Link to Full Story

Some stations in Southern California are charging over $7 per gallon!

Link to Twitter Post

Some think gasoline prices could double again!

“Some gas stations across the country are already bracing for the Next Big Thing involving surging fuel prices, namely the price per gallon potentially exceeding $10."  Senator Melissa Melendez, May 18, 2022

Link

Despite President Biden's best efforts to lower energy prices, crude oil prices remain very high.

Energy Secretary Jennifer Granholm stated during the hearing that the Biden administration was doing everything possible to increase oil production and supply in the United States. Senator Sullivan quotes the actions of the Biden administration in the last three weeks which are exactly the opposite of the energy secretary claims. WATCH:

Questions:

1. Have gasoline prices peaked? 
2. Have high gasoline prices caused to to change behavior? 
3. What would you do to get more supply? 
4. Can President Biden do anything more to lower energy prices NOW?
5. Will high energy prices change how you vote in the next election?

Discuss those questions on my "Investing for the Long Term" Facebook group.

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Inflation Hot at 8.3% but Monthly Readings Much Lower with Energy Falling

CPI-U Inflation came in at 8.3% in April with core inflation at 6.2% over the past year.  Energy, up 30.3% year-over-year, fell 2.7% in April.  The 0.3% monthly change in CPI-U is the lowest since August 2021.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in April on a seasonally adjusted basis after rising 1.2 percent in March, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 8.3 percent before seasonal adjustment.  

Increases in the indexes for shelter, food, airline fares, and new vehicles were the largest contributors to the seasonally adjusted all items increase. The food index rose 0.9 percent over the month as the food at home index rose 1.0 percent. The energy index declined in April after rising in recent months. The index for gasoline fell 6.1 percent over the month, offsetting increases in the indexes for natural gas and electricity. 

Table A. Percent changes in CPI for All Urban Consumers (CPI-U): U.S. city average

Chart 1. One-month percent change in CPI for All Urban Consumers (CPI-U), seasonally adjusted, Apr. 2021 - Apr. 2022

Green Shoots: Inflation MAY be peaking.  See Chart 2 below.  While the CORE inflation is higher than expected, the MONTHLY all items CPI-U number at 0.3% is the lowest BY FAR for the last six months with energy falling by 2.7%.  0.3% annualized is a much tamer 3.6% inflation.  Of course energy is up again this month so this will be hard to repeat without gasoline prices stabilizing or falling.

The index for all items less food and energy rose 0.6 percent in April following a 0.3-percent advance in March. Along with indexes for shelter, airline fares, and new vehicles, the indexes for medical care, recreation, and household furnishings and operations all increased in April. The indexes for apparel, communication, and used cars and trucks all declined over the month.

The all items index increased 8.3 percent for the 12 months ending April, a smaller increase than the 8.5-percent figure for the period ending in March. The all items less food and energy index rose 6.2 percent over the last 12 months. The energy index rose 30.3 percent over the last year, and the food index increased 9.4 percent, the largest 12-month increase since the period ending April 1981. 

Chart 2. 12-month percent change in CPI for All Urban Consumers (CPI-U), not seasonally adjusted, Apr. 2021 - Apr. 2022

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Quotes and table from https://www.bls.gov/news.release/pdf/cpi.pdf

Kirk's Stock Market Charts

Market update for Friday May 6, 2022.  Currently the Nasdaq and Russell 2000 small cap indexes are in bear markets (down over 20% from their highs) while the Dow and S&P 500 indexes are in major, double digit corrections off their highs.

Market Update Closing Values

For those of us who raised cash near record highs at the start of the year when interest rates were low with valuations and sentiment very high, this decline is an opportunity to start putting some of the cash we raised back into the markets.  

I've sent several email alerts to my subscribers reminding them some of the stocks in my newsletter hit the "buy levels" posted in the last newsletter.  Selling SOME near market tops as stocks go higher and higher makes it easier to survive these big declines because rather than panic, we look forward to stock prices falling low enough to trigger my buys listed ahead of time.

10-Yr Treasury Note Rate vs DJIA   

S&P 500 Graphs 

DJIA Graphs 

NASDAQ Charts

VTI - Vanguard's Total Stock Market Fund

A rising Fed Funds Rate was not bad news for the stock market coming out of the Great Recession and the telecom/internet bubble collapses:

US Fed Funds Rate vs. S&P 500   

TIPS Core Yield vs S&P 500
More about TIPS including when to buy them is covered in my newsletter. 

Can the Fed engineer the elusive "soft landing" to tame inflation currently running at 8.5% without pushing the US economy into another recession?  

How do you invest in such difficult times?

First off, I'd start with people who have been recommending TIPS and I-Bonds in their newsletters as I have... start by reading:

• Current Rates for New & Older I Bonds

Then subscribe to:

Kirk Lindstrom's Investment Letter Service

• Subscribe NOW and get the May 2022 Issue for FREE!!!
         (Free only If you mention this blog post)
  
  
• More Information 

Don't miss

• Kirk's Interest Rate Charts for May 7, 2022
  
  
• Kirk's Sentiment Charts for 5/7/22

Kirk's Interest Rate Charts for May 7, 2022

Interest Rate update for Friday May 6, 2022.  Currently the Nasdaq and Russell 2000 small cap indexes are in bear markets (down over 20% from their highs) while the Dow and S&P 500 indexes are in major, double digit corrections off their highs. Meanwhile, The 10-year US Treasury bond has more than doubled this year to 3.12%

US Treasury Interest Rates Graph

Market Update Closing Values

Mortgage Rates: 

I'm so old I remember when I had a VARIABLE loan at 14.0% a year to buy my first home, a townhouse in Sunnyvale CA!  I was sure jealous of my parents who had a CAL-VET loan at fixed at 4.0%.  With that memory, rather than using cash to pay off my home loan early, I locked in a fixed rate mortgage at 3.375 % and put the cash in TIPS and I-Bonds.  Some of my  iBonds have base rates of 3.0% and will pay 10.23% for the next six months! 

• Current Rates for New & Older I Bonds
  
  
• Historical Series I Bond Rates

CPI vs Fed Funds Rate vs Expected 10-Yr Inflation

A rising Fed Funds Rate was not bad news for the stock market coming out of the Great Recession and the telecom/internet bubble collapses:

US Fed Funds Rate vs. S&P 500   

TIPS Core Yield vs S&P 500
More about TIPS including when to buy them is covered in my newsletter. 

Can the Fed engineer the elusive "soft landing" to tame inflation currently running at 8.5% without pushing the US economy into another recession?  

How do you invest in such difficult times?

First off, I'd start with people who have been recommending TIPS and I-Bonds in their newsletters as I have... start by reading:

• Current Rates for New & Older I Bonds

Then subscribe to:

Kirk Lindstrom's Investment Letter Service

• Subscribe NOW and get the May 2022 Issue for FREE!!!
         (Free only If you mention this blog post)
  
  
• More Information 

Kirk's Sentiment Charts for 5/7/22

 Kirk Lindstrom's Investor Sentiment Charts for May 7, 2022

II Bulls Over Bulls Plus Bears 1998 to Now

DJIA vs Oscillators Chart: "Everything before the black dot-dash line is math, everything after is art" and art is aka "guestimates": 

DJIA vs Oscillators
Copyright © KirkLindstrom.com - 05/06/22 

AAII Sentiment - Graphs of the American Association of Individual Investors (AAII) Bulls Minus Bears Sentiment Indicator vs the Dow

AAII Survey: Bulls minus Bears vs. Log DJIA 

Fear and Greed Index

Dow vs Oscillators LT -   05/06/22 

Dow vs Oscillators LT -   05/06/22  

Kirk Lindstrom's Investment Letter Service

• Subscribe NOW and get the May 2022 Issue for FREE!!!
         (Free only If you mention this blog post)
• More Information