Transcript:
Tom Vaughan:
Hello, everybody, welcome to Tuesday, the S&P 500 was down 1.26%. Today, kind of two main catalysts that caused that today. Number one, Lael Brainard was testifying in front of Congress, they are working on nominating her or confirming her nomination for vice chairman at the Federal Reserve. So she was talking very aggressively about fighting inflation, letting money come off of their balance sheet at a little faster rate than some of the things that I’d heard before, you could see the stock market responding negatively during her testimony. And so that was one piece there. And really, you know, we have to take a look at carefully how somebody is talking in front of Congress might be different than what they actually end up doing. Congress right now is concerned about inflation, every voter is affected by inflation, not every voter is affected by the stock market coming down. And so when they’re in front of Congress there, they have been very, very aggressive in their wordings and what have you. Again, we’ll have to wait and see what happens with with the Federal Reserve.
The other catalyst was these sanctions that they’re going to be announcing tomorrow, another group of sanctions on Russia, as specifically, it looks like they want to cut back on some of the purchase of energy from Russia, coal seems to be one of the ones they’re talking about the most, to try to affect Russia’s cash flow from those areas. But one of the problems, of course, is that it does have the potential for raising the cost of energy, and even making some problems for producing things, especially in places like Germany, which has such a heavy reliance upon coal and gas and oil from Russia. And so you’re going to see, maybe some slowing that happens from these increased sanctions, we’ve already seen the gross domestic product projections for these different countries coming down, more so in Europe, but a little bit here in the US. And so that’s kind of a one two punch today, because you have the Federal Reserve, talking about getting more aggressive, which you know, the market has to respond to, and then you have sanctions that are getting more aggressive, which can also slow down the economy, both groups are trying to do the same thing. The fear is the Federal Reserve, gets over, over carried away, and doesn’t really, you know, do what they need to do. And they kick us into recession, because they over raise rates to try so an economy that’s already slowing down because of all this situation in Russia, Ukraine. So it’s gonna make it more difficult for the Federal Reserve. I do think we have to give the federal reserve some, you know, leeway here and see what they actually do and see how they respond. You know, how somebody testifies in front of Congress, when they’re trying to get firmed for a job, may or may not be what they ended up doing. So we’ll have to play that out.
One other thing I think is really important here is that the US is much less impacted by the sanctions than what’s happening in Europe. And you know, we don’t have a huge reliance upon Russian sales or purchasing Russian energy, for example. And so I still think that we’re going to see more and more money being focused worldwide, into the US market. I mean, that’s been happening anyway, in my opinion, if you look at the total rate of return, you know, since the bottom of the pandemic, to now for the US market versus the overall global market outside the US. So pretty stunning differential, I think this is going to push that a little bit further. So it might be more cash flow coming in and purchasing here in the US because of that sanctions situation. And the impact is less here. So we’ll see how that plays out. But that’s that’s seems to be happening so far. I would say that might be part of the catalyst for what is going on, in this run up that we have had, as far as that goes, having a down day like today is no big deal. This is still part of that dip, that grind that we’re going to go through that I was talking about, really, a week and a half ago, get that run up and it kind of goes down and sideways. And this is exactly what we’re doing right now. You build this base, see if it holds up. And if we don’t go back down all the way to the bottom and we might be shooting back up on that next leg up. So this is still part of that process could take a while for it to play out. Let’s see what happens. Look forward to seeing you tomorrow. Thank you very much.