Stock Market & Interest Rate Update

As of Friday's close, the Nasdaq and Russell 2000 small cap indexes remain in bear markets while the S&P 500 and DJIA have rallied off bear market lows back into "correction" territory.

US Treasury and Fed Funds Rates:

CPI & Expected Inflation Rate vs Fed Funds Rate

In my newsletter, I recommend one of two "core" portfolios for about 80 to 95% of your funds and an "explore" portfolio made of stocks from my newsletter "explore portfolio" for the remainder.

My newsletter stocks are volatile by design to add to overall returns with a combination of exceptional stock selection and market timing. You need a good core portfolio to sleep well at night.

I offer different core portfolios for aggressive & conservative investors. I use the same funds for both so you can transition from aggressive to conservative as you age and lower risk for a safe and happy retirement.

If you are not interested in individual stocks, then just follow one of my two core portfolios for 100% of your investment assets. One portfolio is for "conservative" investors and the other is for "Aggressive" investors. They use the same funds, but with different percentages so you can easily move from aggressive to conservative as you age or have success and want to lock in nice gains to retire early.

I believe pages 1 through 10 of my monthly investment letter offer more value than many "mutual fund" newsletters costing much more. If you are not interested in individual stocks or securities, then simply follow one of the core portfolios I recommend on page two, use the "Fixed Income and Interest Rates" update on page eight to help manage your cash, then consider pages 11 through 29 about individual securities as "entertainment."\

Kirk Lindstrom's Investment Letter

 Subscribe NOW  and get
the June 2022 Issue for FREE!!!

More Articles by Kirk Lindstrom:

• Using Asset Allocation to make money in a Flat Market
• Inflation Hot at 8.3% but Monthly Readings Much Lower with Energy Falling

Welcome Back Carter - 8.6% Inflation is the Highest since 1981

CPI-U Inflation came in at 8.6% in May with core inflation at 6.0% over the past year.  The Energy Index rose 3.9% in May and was up 34.6% on the year. Gasoline rose another 4.1% in May and is up 48.7% on the year.  If you think buying a new, more fuel efficient ICE auto or EV will solve your inflation problem, think again as new car prices are up 12.6%, if you can get one, while used cars soared 16.1% on the year.

Chart 1. One-month percent change in CPI for All Urban Consumers (CPI-U)

CONSUMER PRICE INDEX - MAY 2022

The Consumer Price Index for All Urban Consumers (CPI-U) increased 1.0 percent in May on a seasonally adjusted basis after rising 0.3 percent in April, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 8.6 percent before seasonal adjustment.

The increase was broad-based, with the indexes for shelter, gasoline, and food being the largest contributors. After declining in April, the energy index rose 3.9 percent over the month with the gasoline index rising 4.1 percent and the other major component indexes also increasing. The food index rose 1.2 percent in May as the food at home index increased 1.4 percent.  

Chart 2. 12-month percent change in CPI for All Urban Consumers (CPI-U)

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

The index for all items less food and energy rose 0.6 percent in May, the same increase as in April. While almost all major components increased over the month, the largest contributors were the indexes for shelter, airline fares, used cars and trucks, and new vehicles. The indexes for medical care, household furnishings and operations, recreation, and apparel also increased in May. 

The all items index increased 8.6 percent for the 12 months ending May, the largest 12-month increase since the period ending December 1981. The all items less food and energy index rose 6.0 percent over the last 12 months. The energy index rose 34.6 percent over the last year, the largest 12-month increase since the period ending September 2005. The food index increased 10.1 percent for the 12-months ending May, the first increase of 10 percent or more since the period ending March 1981.

• 
  

Gasoline Nearing Eight Dollars Per Gallon in Menlo Park California

Biden Barometer
 Natural Gas, Oil Price & Stock Market  Performance under President #46 Joe Biden

Sadly, I see little relief in the short term as gasoline prices have continued to soar in June.  Hopefully you followed my newsletter advice to own some US Treasury Series I Bonds that are currently paying us 9.62% for new issues and I own some that are paying  12.76% due to their base rate of 3.0% plus inflation.

• Current Rates for New & Older I Bonds
  
  
• More about iBonds and how rates are calculated at Current Series I Bond Rates

Kirk Lindstrom's Investment Letter

 Subscribe NOW  and get
the June 2022 Issue for FREE!!!

More Articles by Kirk Lindstrom:

• Fed Funds Rate vs US Stock Market Indexes - Historical Charts
  
  
• Market Update - Gasoline Nearing Eight Dollars Per Gallon in Menlo Park California
  
  
• New & Old Series I Bond Rates are 9.62% to 13.39%

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

Fed Funds Rate vs US Stock Market Indexes - Historical Charts

This chart shows the US Federal Funds Rate vs. the US stock market index values from 1993 through today.  The next three charts show the Dow, S&P 500, Nasdaq and Russell 2000 indexes over the same period.  The final chart shows US Treasury interest rates from 1994 through today.

US Stock Markets (Log Scale) vs. Fed Funds Rate 

DJIA chart showing Irrational Exuberance & Pessimism on a log scale

S&P 500 Intraday Prices - Log Scale

Nasdaq Composite - Intraday log chart

 US Treasury interest rates

Kirk Lindstrom's Investment Letter

 Subscribe NOW  and get
the May 2022 Issue for FREE!!!

More Articles by Kirk Lindstrom:

• Using Asset Allocation to make money in a Flat Market
• Inflation Hot at 8.3% but Monthly Readings Much Lower with Energy Falling
• May Jobs Report Shows Fewest New Private Sector Jobs in a Year

end

Market Update - Gasoline Nearing Eight Dollars Per Gallon in Menlo Park California

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 in the Bay Area and nearly $10 further away! 
• The stock market, which has rallied a bit off recent bear market (down 21%) lows, is having trouble discounting the future unsure if high inflation will continue and push us into stagflation or a recession or will inflation fall as once hoped which would make current stock prices appear a bargain.
• See the video below where former Federal Reserve Chair and current treasury secretary for the Biden administration admits she was wrong in predicting inflation would be transitory.

The most expensive gas in US is at this Mendocino station at nearly $10 a gallon, GasBuddy says:

In Menlo Park, the financial engine of the Silicon Valley found  in venture capital offices on Sand Hill Road, prices are nearly $8.00!

On Sand Hill Road in Menlo Park CA

Gas Buddy isn't showing the Menlo Park prices this morning (6/4/22 7:03 AM update) on their price map... Odd because the idea is to show how to save money by driving a bit.

Nobody should be surprised.  We as a country voted to "solve Climate Change" by making gasoline expensive compared to electricity.  The trouble is natural gas prices are soaring and so are the prices we pay for electricity since most states use natural gas to satisfy the incremental demand for electricity.

California's Governor Newsom says he's doing all he can to avoid gas rationing and power blackouts this summer by keeping our last nuclear power plant online.  All this "future demand" adds to current demand causing prices to soar long before Russia invaded Ukraine as this price graph shows.

Fortunately for the rest of the country, gasoline prices are high but not nearly as high as California:

https://gasprices.aaa.com/

Pete Buttigieg, channeling his internal Marie Antoinette says buy an EV (ie the poor can eat cake.)

So, even if everyone follows the Biden Administration's goal to have us switch to EVs, there might not be enough electricity for them and that will push energy prices at home even higher.  

Soaring energy prices add cost to just about everything which could push us into a recession.  But with all the government stimulus money not spent and perhaps more for infrastructure and other projects plus artificially low interest rates from the Fed, we could see high inflation remain.  

Just this week, former Fed Chair and Biden Administration treasury secretary Janet Yellen told an administration friendly CNN that she was WRONG last year about inflation.

"Look, I think I was wrong then about the path inflation would take...."

All this has the stock markets in turmoil.

Interest Rates:  After closing the week at 3.12% on May 7, 2022, the 10-year US Treasury Bond fell to 2.74% last week then soared again this week to 2.96% as the bond market can't decide if it fears inflation or a recession more.

Interest Rate Graph

Interest Rate Table

Stock Market Update for 6/3/22:  

Kirk Lindstrom's Investment Letter

 Subscribe NOW  and get
the May 2022 Issue for FREE!!!

More Articles by Kirk Lindstrom:

• Using Asset Allocation to make money in a Flat Market
• Inflation Hot at 8.3% but Monthly Readings Much Lower with Energy Falling

May Jobs Report Shows Fewest New Private Sector Jobs in a Year

👩🏻‍🏭👷🏻‍♂️Fewest New Jobs in a Year 👨🏻‍🏭👷🏻‍♀️ 🏢⚒

THE ADP NATIONAL JOBS REPORT SHOWS PRIVATE SECTOR EMPLOYMENT INCREASED BY ONLY 128,000 JOBS IN MAY🍜🍝 

Only 128,000 new jobs in the US in May vs 247,000 new jobs created in April.

"Under a backdrop of a tight labor market and elevated inflation, monthly job gains are closer to pre-pandemic levels," said Nela Richardson, chief economist, ADP. "The job growth rate of hiring has tempered across all industries, while small businesses remain a source of concern as they struggle to keep up with larger firms that have been booming as of late."

So much for a booming economy... Will the Fed continue to raise rates at 0.50% per meeting while slashing QE bond buying with this data showing economic growth has slowed, especially with struggling small businesses?

It looks like April was revised lower by 45,000 too as they showed 247,000 on the April report but in the May table they show only 202,000!  

Four straight months of falling numbers.  Will this be blamed on Putin?

Discuss this article on my Facebook Group at: 

• THE ADP NATIONAL JOBS REPORT SHOWS PRIVATE SECTOR EMPLOYMENT INCREASED BY ONLY 128,000 JOBS IN MAY

Kirk Lindstrom's Investment Letter

 Subscribe NOW  and get
the May 2022 Issue for FREE!!!

More Articles by Kirk Lindstrom:

• Kirk's Stock Market Charts
  
  
• Kirk's Interest Rate Charts
  
  
• Kirk's Investor Sentiment Charts  

Note:  May 2022 ADP Report