A Week of Losses

Last week brought more losses in more ways than we may think.

Sure, stock prices dropped 2.68%, capping the month's losses at 8.78%. (Oh, and let's not gloss over the losses YTD: 13%.) 

Bond yields have continued rising. So having bonds in a portfolio continues to provide little balance against stock price drops. In fact, you lost more money if you had bonds and have been losing so far this year.

Adding insult to injury, Gold and the Miners that pull the stuff out of the ground fell as well: down 2.03% in April, down 2.07% for the month. (Note that most of the month's loss came in this past week alone.)

So most of us were whacked and whacked anywhere from modestly to brutally. The numbers are one thing. But I suspect that this past week the loss of wealth could be felt by many of us. It's not a pleasant feeling.

So markets brought losses. But there's more.

What about inflation? It's up and rising. Even when it was low, it slowly ate away at our wealth. But now that it's up and rising, it's moved from nibbling to big bites - very big bites. While no one can say for sure how much higher and longer inflation goes, we do know that it's not "transitory." 

What about the war - the one begun when Russian forces invaded Ukraine? As bad as economic losses might be, the loss of life trumps all that. And with Russian attacks on civilians and infrastructure, hunger and disease kill and maim more people.

And as the Fed eschewed the "transitory" B.S., the war commenced and added another layer of inflation on top of what already existed. How? Through added supply chain issues - one top of those caused by the pandemic lock-downs.

Last week's losses didn't come out of the blue. Most were simply the most recent stage of losses that became more apparent as 2022 progressed. The seeds had been planted, the trends were in place, and they all picked up steam starting in January, and continuing now through April.

For markets, it's a stark contrast to the overtly bullish stock bond markets we've seen since 2009. Of course, stocks were already deteriorating towards the end of 2021. But the big averages really didn't tip most investors off that trouble was brewing. Most folks just go with the flow. And the flow was mostly up. 

As for the war, the history of Russia and Ukraine may seem complicated. But unless you believe the Putin-pushed myth that Ukraine is somehow "part' of Russia, the history reveals a Russian (then Soviet) government that dominated and bullied Ukrainians for centuries. And in the end, it was Russian forces that invaded Ukraine.

After all is said and done, we're left with losses that have affected most of us. And we're not done yet.

For what it's worth, we'll leave you with our monthly review of market results including some of the ratios we look at - just the numbers:

Monthly Asset Updates (as of 4/30/22)

 

-   4/30/22: SPY DOWN 8.78%

-   4/30/22: BONDS - 3-month 0.85, UP from 0.52 last month - 2-yr 2.70, UP from 2.28 - 10-year yield 2.89 UP from 2.32 last month - 30-year 2.96 UP from 2.44 last month

-   4/30/22: GLD down 2.07% for the month. GDX DOWN 8.76% - GDXJ DOWN 8.36%

-   4/30/22: SLV DOWN 8.04%

-   4/30/22: USD:  USD Index - DXY – DXY 103.21 UP from 98.35 last month.

 

Weekly Results

 

-  Stocks: DOWN 2.68% - Transports now down sharply and PTI back below 89-day MA.

-   BONDS: Yields continue rising. Adens now keeping a close watch on these – possibly will advise to sell – but not yet.

-   GOLD: DOWN 2.03%. Adens: C Rise has gotten traction after very weak period. CN see Gold cycles bottoming early summer, Bull Market resuming then.

-   SLV: Silver/Gold Ratio 83 – UP 3

 

Important Indicators – (as of 4/30/22)

-   Advance-Decline Line: Mirrors S&P – Down

-   Fed Funds Target Rate – Below 10-year bearish (50 vs. 2.89) – Yes.

-   10-year minus 2-year TSY negative?: No (2.89– 2.70 = 0.19) – No

-   10-year minus 3-mo TSY negative?: No (2.89– 0.85. = 2.04) – No

-   Russel 2000 Index (IWM): Down like SPY

-   DT Industrials/Transports: Transports have not confirmed new low of Industials – So DT still bullish

-   S&P 500 (SPY) vs. Financial Select Sector SPDR Fund (XLF): mirrors SPY down.

-   S&P 500 (SPY) vs. S&P Equal Weight (RSP): Mirrors S&P – No divergence

-   S&P 500 (SPY) vs. Value Line Geometric Index (VALUG): VALUG a broader index than S&P or Dow. Mirrors S&P

-   Hi-Yield Credit Spread – 3.83 UP from 3.33 - Spread between below-investment grade bonds and similar duration Treasuries: When high, indicates increasing defaults. Has been trending down since March.

-   Shiller PE/10 – 32.53 –DOWN from 36.71 – still historically high (even after the quick, steep fall in stock prices, it remained elevated). [This Index highest value as long-term indicator of initial level or withdrawals (% TAV) for Retirement Investments: Higher P/Es indicate lower withdrawal % and vice-versa. Less value as guide to stock allocations shorter-term.]

-   Gold Futures: In contango