In our Learning Markets livestream this week, we explored more of what’s becoming commonplace in the market – volatility. From Thursday’s bounce to the fallout after the Fed chair’s comments at the Jackson Hole Economic Symposium Friday, if you’re like us, your head was spinning. The good news is that all of this chaos should shake out once the hangover from the Fed comments subsides.
The market hit a bit of a tailspin last week because traders were anticipating announcements coming from Jackson Hole, where Fed Chair Jerome Powell unofficially revealed his hawkish view of monetary policy Friday. The Fed will continue to raise rates aggressively, which could cause economic pain, he pointed out, in not only individual households, but also in tech stocks, which tend to perform badly when interest rates rise. Because the S&P is so tech-heavy, that can drag down the rest of the index.
But there are so many variables that could mitigate his gloomy comments and the rest of the market’s bad news, and after all, we’ve been facing the headwinds of negative reports all year…
The Bottom Line
The market is still relatively favorable. Inflation is still an issue, and there’s some slowing in growth rates, but growth rates are still net positive. As long as jobs continue to grow, then we don’t expect the market to break support; a bounce is still possible this week. Keep in mind that August and September traditionally are the worst months for the market, so don’t be surprised to see things lag a little anyway.
Earlier today, we got an indication that job growth still is indeed positive. The Job Openings and Labor Turnover Survey was released, and it blew away expectations with one million more job openings than expected. That favorable news allays some of the fears the Fed created in last month’s meeting as it noted an “extremely tight labor market” as a result of inflation.
Another report of note this week is the ADP payroll report, due out Wednesday. It has been less impactful for the market, but investors are looking for any indicators right now.
Finding New Investing Opportunities
We’ve been advising our readers to remain conservative, but many traders are itching to do something.
In a choppy market, cash is king, so we prioritize large-cap companies – and there are a lot of those. Buy the dips in a market like this. Large-cap growth would be the priority – those sectors include consumer defensive stocks. Retail stocks are compelling if you have the patience to see them profit after overcoming supply chain and inventory issues.
Don’t focus on utilities right now – energy is high-risk and almost no-win, especially if recession conditions increase.
Viewer Questions and Shorts Stuff
This week in the livestream, we cover the week’s yo-yoing market, and we address the questions of some worried traders. If you have questions of your own, just drop a line in the comments section or email us at email@example.com.
What is your updated outlook on NVIDIA? – Stephen R.
What are your thoughts on Adobe and other tech stocks in this higher-rate environment? – Greg A.
Could a large inverse head-and-shoulders pattern be in play for the S&P 500 after Friday’s big drop? – Craig S.
Only have a few minutes? Check out our shorts this week, where we address everything from the symposium to the market bottom.
If you have any questions yourself about options trading, specific stocks or bonds, or market trends in general, we’re happy to answer them. Just email firstname.lastname@example.org or drop us a line in the video comments.
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