Dear valued client,
Volatility in the market did not wane this week; up 2-4% one day and down by even more the next. There’s still a considerable amount of uncertainty weighing on investors’ minds. I suspect gradual selloffs will continue to occur over the next couple of weeks/months until inflation concerns are assuaged and the global economy is on more firm ground.
As I’ve told many of you already, it seems strange to me that the stock market is the only market where people are willing to run away from a discount. Valuable companies are selling at a 10-30% discount at the moment. This is an ideal time to invest. Given his latest moves, Warren Buffet would agree. The legendary 91-year-old investor, who’s worth more than 100B, poured tens of billions of dollars into the market this week. He added to his already lucrative positions such as Apple and American Express, but the majority of the recent investment was directed towards energy companies. The energy sector is the only one of the 11 sectors of the S&P 500 that has generated positive returns so far this year.
For those interested in following in Buffet’s footsteps, Fidelity has an energy fund that is up 14% so far this year. Having roughly 5-10% of your portfolio invested in the energy sector would not be a terrible idea. If you are interested in investing in energy, please give me a call.
Disappointing quarterly reports emerged from the retail business this week as Target, Walmart, and Lowe’s posted shrinking margins as inflation is eating into their profits. The cycle of higher prices for goods leading to higher salaries for employees is adding to the downward pressure on the market. David Donabedian, chief investment officer at CIBC Private Wealth had this to say, “We are moving into a more challenging time for markets. We need to see signs that inflation is not just peaking but actually decelerating before you find a sustainable bottom in the market. That is going to take at least a couple of months.”
In European news, Sweden and Finland have applied to join NATO. This would heavily bolster Europe’s eastern flank and help contain Russia’s expansionary vision. This move also plays into Putin’s narrative that NATO is an aggressive coalition aimed at destroying the motherland. The two Scandinavian countries had remained neutral in the past to placate Russia, but with the war in Ukraine quickly approaching its third month (feels more like third year), they are beginning to realize the risk of not being part of the NATO alliance.
Have a terrific weekend everybody. Both professional hockey and basketball playoffs are in full swing. It will be interesting to see what these teams are made of when it really counts!
Regards,
PW
“Be greedy when others are fearful.” – Warren Buffet
—
