Raymond Kanyo, CFA
MarketBites: Inflation Reading, Yield Curve Inversion
Portfolio Manager Commentary:
Stocks continued to drop on Tuesday as investors remained cautious ahead of Wednesday's inflation report. The yield curve remained inverted at levels last seen in 2007, just prior to the financial crisis (yield curve inversions tend to precede recessions).
Technology shares struggled as recession fears continue to hit valuation multiples. The energy sector continued to sell off, as oil prices pulled back. Travel stocks flew a little higher after an upbeat travel forecast from American Airlines.
Today, inflation will be the focus. Economists are predicting 8.8% year-over-year inflation, and 5.7% excluding food and energy prices. It might be encouraging that commodity prices and the housing market have started to cool off, putting downward pressure on inflation.
Chart of the Day:
The U.S. dollar keeps gaining strength against a basket of currencies as investors flee to the relative safety of the world's reserve currency. This highly sought after and privileged status has only been achieved by a select few great empires. In every case, the empire weakened and consequently lost its reserve currency status. Will we see the United States break the trend? At Avidus, we echo Warren Buffett's famous words of "never bet against America." However, if you would like to get a different perspective from another great investor I recommend Ray Dalio's book called The Changing World Order.
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