Selling stocks and buying safe havens

Stocks suffered heavy losses as tensions escalate in Eastern Europe as the World awaits Russia’s next move. Fed members are focused closer to home and talking a lot about hiking rates.

Border tensions.  Yes, indeed there are border tensions between Russia and all but one of its neighbors. The rest of the world watches and waits, jaws slightly ajar, and I keep thinking lately how my kids have absolutely no personal historical reference to some of what we have experienced in the past few years. First, we have the pandemic.  We witnessed harrowing scenes of piled up body bags, blurred-out patients on ventilators, surgical masks, lockdowns, long lines for testing, successful vaccine trials, reopening…repeat for DELTA…repeat for OMICRON. The magnitude of the pandemic is nothing many of us have experienced in our lifetimes, no matter what your age. Early in the pandemic, I was reminded of the HIV/AIDS crisis of the 1980s. Clearly, very different, but a global health crisis, nonetheless, and with very little understanding of it, and no real cure at the time, it was certainly a scary period.  Market crashes? We certainly have had our share of those in the years, past. We have had black Mondays, black Fridays, etc. More on that in a moment. 

Now, kids are faced with fast-rising inflation. My kids have no concept of what that really means, as inflation has been relatively tame for the better part of 30 years. Need I bring you back to the long gas lines in the 1970s? Remember the flags which determined if you were even allowed to queue up for your $5 allotment of gas? How about that crazy inflation in the 1980s, where prices were growing by +15% a year! How could one make ends meet in that type of inflationary environment? It was tough. Now we have Russia surrounding its neighbor with 150,000 troops, playing a dangerous game of brinksmanship. The world watches on edge, as the situation unfolds. If you are of a certain age, you remember as I do, the cold war.  The nuclear threats, the Federal Civil Defense Administration drills at school…duck and cover… those were crazy and scary times. What about the Fed, threatening to raise interest rates to 1% by mid-summer? That could sound scary to you…if you have never witnessed the Fed Funds rate at 20%! Yeah, that happened in the early 1980s. So, in the past 2 years, Millennials and Gen Zs have endured a global health crisis, a market crash, a recession, a recovery, crazy inflation, the threat of military aggression from Russia, and rate hikes. 

For the Post War Generation, Baby Boomers, and Gen Xs, we have seen all of this before. In the interval of WWII through the COVID-10 Pandemic, the US has 10 recessions, a Global Financial Crisis, the Asian Flu, HIV/AIDS, SARS, 9% inflation (early 50s), 12% inflation (early 70s), 15% inflation (early 80s), 10 bear markets, the Dotcom Bubble, 12 Fed Funds raising regimes, Russia in Hungary (1956), Russia in Czechoslovakia (1968), Russia in Afghanistan (1980s), Russia in Georgia (1991 and 2008), Russia in Chechnya (1994 and 1999), Russia in Crimea (2014), the Cold War (1946 – 1991),  Perestroika / Glasnost (1991), and some 27 armed conflicts (Korean War through Libya). So, yes, we have seen all of this before.  Ready to have your mind blown? Since 1950, the S&P500 has grown by +25,988%, that’s equivalent to +11.56% per year.

WHAT’S SHAKIN’

PPL Corp (PPL) is trading lower by -6.72% in the pre-market after it announced that it missed EPS and Revenue estimates by -17.6% and -7.34% respectively. The company also announced that it will be cutting its dividend.  Dividend yield: 2.84%.  Potential average analyst price target upside: +13.0%.

Deere & Co (DE) shares are higher by +1.44% after it announced that it had beaten EPS and Revenue estimates by +29.15% and +4% respectively. The company also provided forward EPS guidance which was stronger than analysts’ were predicting.  Dividend yield: 1.10%.  Potential average analyst price target upside: +7.0%.

YESTERDAY’S MARKETS

Stocks took a drubbing yesterday on fears of an escalation in the Russia/Ukraine conflict. The S&P500 fell by -2.12%, The Dow Jones Industrial Average lost -1.78%, the Nasdaq Composite Index dropped by -2.88%, the Russell 2000 traded lower by -2.46%, and the S&P500 ESG Index gave up -2.16%. Bonds advanced and 10-year Treasury Note yields lowered by -7 basis points to 1.96%.  Cryptos fell by -7.76% and Bitcoin lost -7.7%.

NXT UP

• Existing Home Sales (Jan) may have pulled back by -1.3% after slipping by -4.6% in December.
• Conference Board Leading Economic Index (Jan) is expected to have grown by +0.2% compared to an +0.8% gain in December.
• Next week: markets are closed for Presidents’ Day on Monday, more earnings as well as more housing numbers, regional Fed reports, PMIs, Consumer Confidence, GDP, PCE Deflator, and University of Michigan Sentiment. Check back on Tuesday for calendars and details.