• Stocks around the globe are in rally mode after a tough week.

  • Treasury yields are up small, while prices are down small.

  • Oil whips around…and is solidly in the $100/$120 range.

  • It feels like we are closer to a bottom – but don’t bet the ranch just yet.

  • Try the Thighs/Pancetta and Balsamic Vinegar.

The S&P came within 1% of being in a bear market, Existing Home Sales fell by 2.4%, Mortgage rates continue to rise, the Philly Fed Index falls significantly as investors continued to price in a recession. This week’s negative results from such consumer staple stalwarts TGT and WMT only raising concerns about the health of the consumer have weighed on stocks prices and bond yields. In fact the Consumer Staples ETF – has been the worst performer – falling 10% alone this week….- recall the staples have been an ‘outperformer’ this year – hugging the unchanged line – which made it a winner in a nervous environment…..but after the warnings we have seen from members of the sector over rising costs, a weakening consumer, continued supply chain disruptions,  rising inventories – (because consumers are now choosing to leave something on the shelf vs. buying it) – this sector has come under assault testing the limits of investor psyche.

The Dow lost 240 pts or 0.75%, the S&P gave back 25 pts, the Nasdaq fell by 30 pts, the Russell added 2 pts and the Transports continued to get slammed – falling 253 pts or 1.84%.  Weakness in the transports being credited to rising energy prices (think diesel) and a weakening consumer.

10 yr. bond yields ended the day yielding 2.84% - losing ground for 7 of the last 9 trading days…….as investors continued to run for the safety trade. Rising bond prices – send yields lower and that usually suggests nervousness.

Oil – which saw prices spike early in the week to a high of $115 ish, came under pressure – falling to a low of $105.50 as trader types locked in some short-term gains – rallied again yesterday…. rising 2% to end the day at $112/barrel.  This morning oil is off 50 cts at $111.65/barrel.

Talk of the FED becoming more aggressive in the months ahead has ignited the latest round of volatility as rate increases of 75 bps to 1 full percent are now being introduced into the conversation after the poor results from the big consumer sector suggest that the economy needs (and maybe wants) a bigger move.  Talk of an ‘inter’ FOMC move also on the table….now that could do 1 of 2 things…it could send stocks further into the abyss – because that might suggest that even the FED doesn’t believe that their recent moves are helping or it could suggest that the FED recognizes that – since it ain’t getting any better, they need to do more…..and stocks just might rally…..either way, it will be what it will be…..You just need to remain focused.  

US futures are higher this morning…. Dow futures up 266 pts, the S&P up 42 pts, the Nasdaq up 175 pts and the Russell is up 24 pts.   News that China CUT its 5 yr. prime rate is being credited to today's‘ feel good’ mood.  Again – I would say not so fast…. Today’s feel-good mood – in my opinion – is nothing more that a rebound from a short-term oversold position and a volatile week.  There is no economic data to drive the action so investors appear to be going shopping – looking for bargains amongst the wreckage.  Nothing more…. Again – if you are making investment decisions based on what is happening in the 5 yr. lending rate in China – you might want to hand you money management over to a professional.

Look – markets have been all over the place and opportunities are being created….and as such investors who have been patient are now finding bargains in very good, solid quality names and that is what is driving the action today…. Opportunity is the name of the game…..but let’s not get crazy…do not steer too far off course – stick with the mega-cap, multinational names that offer stability but have gotten dragged down in the latest hysterical headlines….In one month – we have seen AAPL down 23%, MSFT down 20%, JPM down 20%, BAC down 20% and now we have some real short term damage done to some big consumer staple  titans….AMZN down 37%, WMT down 25%, K down 11%.  What I am saying is – do not let the noise distract you and while that is difficult – that is exactly what you need to do…. remain focused and don’t get caught up in the emotion of it. 

Stocks across Europe are all higher this morning as well… they are also giving the latest China move the credit – and again I would say – nah…. it’s just a reaction to some real bargain hunting in the high-quality names that have gotten beaten up just like here.  German producer prices surged by 33.5% y/y in April – marking a new record as the war in Ukraine continues to drive up energy costs in Germany as well as Europe.  At 6:30 this morning – markets across the region are all up about 1.8%.

The S&P closed at 3900….and traded in a range of 3876/3945……and while I don’t think it is over just yet, it does appear that we might get a reprieve at least for today. The talk of a more aggressive FED will cause stocks to remain volatile – so don’t get too comfortable just yet….but don’t let opportunity escape you…if you have been building a cash position – take some and put it to work in stocks that are presenting an opportunity….I will continue to overweight the names I have been discussing….Consumer staples, financials, big mega cap tech (not the disruptive, sexy names), coal and natural gas, semi’s and industrials.  See – I think these are all places to put some money that offer long term opportunities even if there is more downside ahead…because I think we are closer to the bottom than not and at some point, you have to trust your gut or at least trust your advisor.

3850/3900 feels like it wants to bottom…. the down trending line drawn from the highs of March 2022 and the trendline that is drawn across to March 2021 suggest that we are about to break out- one way or the other... ….if we hold right here at the 3850/3900 level then look for 4100 to be the resistance point on any move higher….….If we rally and pierce 4100 – then a swift move to 4300 would not surprise me…..but if we fail to hold 3850/3900 – then the push lower could take us to 3600….Which is why I say – stick to the plan…do not try to call market bottoms or market tops.  Buy quality names that offer long term stability and pay you to own them.  In the end expect more turbulence ahead…because stocks will continue to thrash around.  While the risk to the downside is still very real – I do think it is subsiding. 

Chicken thighs with pancetta and balsamic vinegar

For this you need:  Olive Oil, Diced Pancetta (Or Bacon), 8 Medium Sized Skinless Chicken Thighs, Onion, Diced, Garlic Cloves, Peeled & Minced, Dry Red Wine, 1 Can Diced Tomatoes, Tomato Paste, Water, Chopped Rosemary, Chopped Thyme, S & P, Red Hot Pepper Flakes (Optional), Balsamic Vinegar, Chopped Fresh Parsley.

In a large heavy skillet, heat the oil over medium heat and cook the pancetta until cooked through and lightly browned, about 5 minutes.  Remove the pancetta to a plate, set aside, and brown the thighs well on all sides, about 10 minutes.  Remove the chicken to the plate and cook the onions until translucent and soft, stirring often, about 5 minutes.

Add the garlic and sauté for 3 mins or so, Add the wine, (about ½ cup) increase heat to medium high heat, and cook just until the wine is reduced by half.

Now add the tomatoes, tomato paste, water, rosemary, thyme, salt, pepper, and red pepper flakes if you are using.

Bring to a boil, then reduce to a simmer and return the chicken and pancetta to the pot. Cover the pan, and simmer for 20 mins, or until the sauce has thickened, adding additional water as needed if the sauce thickens too much. Taste the sauce, and adjust s&p as needed. Now stir in about 1 tblsp of balsamic vinegar – mix well and place the chicken on a platter.

Top with the sauce, then sprinkle with the chopped fresh parsley.

General Disclosures

Information and commentary provided by ButcherJoseph Asset Management, LLC (“BJAM”), are opinions and should not be construed as facts. The market commentary is for informational purposes only and should not be deemed as a solicitation to invest or increase investments in BJAM products or the products of BJAM affiliates. The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. There can be no guarantee that any of the described objectives can be achieved. BJAM does not undertake to advise you of any change in its opinions or the information contained in this report. Past performance is not a guarantee of future results. Information provided from third parties was obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness.

Different types of investments involve varying degrees of risk and there can be no assurance that any specific investment will be profitable. The price of any investment may rise or fall due to changes in the broad markets or changes in a company’s financial condition and may do so unpredictably. BJAM does not make any representation that any strategy will or is likely to achieve returns similar to those shown in any performance results that may be illustrated in this presentation. There is no assurance that a portfolio will achieve its investment objective.

Definitions and Indices

The S&P 500 Index is a stock market index based on the market capitalization of 500 leading companies publicly traded in the U.S. stock market, as determined by Standard & Poor’s.

UNLESS OTHERWISE NOTED, INDEX RETURNS REFLECT THE REINVESTMENT OF INCOME DIVIDENDS AND CAPITAL GAINS, IF ANY, BUT DO NOT REFLECT FEES, BROKERAGE COMMISSIONS OR OTHER EXPENSES OF INVESTING. INVESTORS CAN NOT MAKE DIRECT INVESTMENTS INTO ANY INDEX.

BJAM is an investment advisor registered in North Carolina and Arizona. Such registration does not imply a certain level of skill or training. BJAM’s advisory fee and risks are fully detailed in Part 2 of its Form ADV, available upon request.

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