Tuesday, May 24, 2022

Valuation Looks Compelling But Is It Time To Buy?

Time to start buying ? Valuation is tempting  after the meltdown.

US shares took at beating with Nasdaq 100 down 30 % and S&P testing the 20% bear market benchmark.  Valuation looks compelling but is it time to buy?

United States Private Consumption accounted for 68.3 % of its Nominal GDP in Mar 2022. 

Shares of U.S. retailers and consumer-oriented stocks took a beating last week on worries about whether surging inflation will continue to hurt corporate bottom-lines and cause shoppers to cut back.

Last week, consumer staples dived 8.6% and consumer discretionary tumbled  7.4%, the biggest declines of any S&P 500 sectors, with inflation hammering corporate results. Shares of some companies fared far worse, with Walmart down 19.5% for the week and Target down  29% after disappointing results. 

We are beginning to see Investors consumers cut spending in the face of higher prices. This is happening sooner than what most on Wall Street are anticipating .

I think we are only at the beginning of people cutting down spending  and changing their spending patterns.

The latest consumer price index jumped 8.3% on an annual basis. Prices for gasoline stand more than 50% higher than a year ago, according to AAA.

Gasoline prices are scaling new high while oil prices has stubbornly stay above the 100 dollar/ barrel mark will keep undermining consumer spending.

A survey by Morgan Stanley found that more than half of consumers plan to cut spending over the next six months due to inflation.

The  slump in share prices has made valuations and risk/reward more tempting but we to see evidence of ebbing inflation before we start bottom fishing .  

Private consumption makes up 68 % of the US economy , when consumer cuts back spending US and the world is going into recession. This bear market has more downside , it’s not time to get  into stocks yet .

All posts and charts are for educational and illustration purposes only

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.