Transcript:
Tom Vaughan:
Hello, everybody, welcome to Monday, the S&P 500 was down 3.2% today. And really the main catalyst right away this morning was a report that came out of China that showed that their production dropped in April, which is to be expected with the number of people that they have locked down. There’s more reports coming out today also about additional lock downs that they’re working on, and making them more strict and those types of things. And so, you know, as I mentioned, in my Friday summary, the Federal Reserve’s going to do what they can to try to bring demand down to try to help inflation, but at the same time supply would be coming up would be ideal. If supply is dropping, then the Federal Reserve is chasing that downward moving supply. And that’s what can create a recession. And so those are the things that we really want to focus on is that supply chain.
So the news coming out of China was negative today, and the market responded negatively to that, as expected, I think the thing that we have to realize here, though, is that some of these things can change virtually overnight. You know, in Hong Kong, for example, they did a big lockdown, trying to suppress the virus case counts for growing, it didn’t really work. Because it is very difficult to get back to zero cases, which is what they’re trying to do is, especially because this particular variant is pretty contagious. And so Hong Kong ended up releasing some of those, you know, locked down criteria, just because they felt like you know, it wasn’t going to work, and they were going to kill their economy trying to do that. So it’ll be interesting to see what happens with China, they could change their mind tomorrow, and the market probably responded quite aggressively to the upside if that was true.
And we’ve got some other positive catalysts that could happen. This the the inflation reports coming out on Wednesday, we’ll see how that plays out. So there’s plenty of things to look out here and to kind of focus on and to realize that some of these things can change virtually overnight, the situation in Ukraine could change pretty radically all of a sudden, unlikely, but still possible. So these are the things that you know, we really have to watch out for is if you get too negative, and you start to panic, and you start to run out, you know, the market could turn around and have a 10% Upside run pretty quickly. So I’d rather see some of these reports come out, find out what is happening with inflation, continuing to watch what’s happening in China continue to watch the supply side dynamics that we watch for looking at the leading indicators.
And let’s just watch for the possibility of recession. There are lots of different signals that are showing some possibilities of recession, obviously. But some of the really hardcore ones aren’t there yet. And I think a lot of people are discounting how powerful the economy is at this point in time. So it’s harder to get it to go into recession, when there’s so much pent up demand and so much cash flow coming in to purchase a product, especially here in the US. So let’s let’s be patient here. Wait to see what’s going to happen. It’s important to have a diversified portfolio which we of course do and you know, the quality companies will rise to the top. Again, you know, they’ve all gotten a lot cheaper. Just recently there will be some bottom fishing that comes in at some point in time. So let’s see what’s going to happen and I will talk to you tomorrow and we’ll just keep looking at it kind of day by day. Thank you very much.