Nick Hodge,
Publisher
Feb. 10, 2022
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—Nick
The only things I’ve purchased in the public markets the past week are bonds, gold, and gold stocks — but none of them in significant size.
I think the Fed is going to have a tough time raising rates. In fact, I have told you that rates will likely paradoxically move lower given the slowing rate of growth the US economy is about to experience.
When bond yields go down, bond prices go up.
This is a defensive move meant to preserve capital as I don’t think the volatility we saw to start the year is behind us. Mainly just parking some cash there to also get the yield.
I also bought some gold and gold stocks in the past week, all either producers or royalty companies.
I know the stock market just delivered a very solid bounce from its January selloff. A dead cat will do that too.
Reuters recently reported what I’ve been telling you was going to happen for a few weeks now:
S&P 500 companies are still beating analysts' earnings expectations for the fourth quarter of 2021, but they are doing so by a much lower margin than over the past year when companies were just bouncing back from the depths of the pandemic.
Mr. Market doesn’t care about earnings beats. He cares about the change in the rate of the direction things are going. And growth is slowing fast because it is coming off of such high growth/inflation last year.
It’s going to be a quarter or two of macro turbulence.
GDP is going to do the same thing as earnings are doing.
And the Federal Reserve is essentially a wildcard. Investors can’t tell if they are going to raise rates or not. Raising them would exacerbate the economic and stock pain.
The angst of the situation is causing spastic reactions. Facebook sold off more than 20% in after hours trading last night after reporting earnings.
So it continues to be a risk-off environment.
Here’s how I’m positioning for it…