Weight-loss wonder drug Zepbound reduces weight of certain stocks in your portfolio

Stocks had a mixed close on Friday as flash PMIs indicated stronger than expected sentiment from the guys and gals who make real decisions. You can ignore the fact that the Leading Economic Index has been negative since March of 2022, but you probably shouldn’t.

Know no. I spent a bunch of time with my extended family this weekend. I was chatting with someone whom I haven’t spoken with in a while. He reads my daily note EVERY DAY, thank you, so, technically… we speak quite often. Really the only thing he is missing is what I ate for dinner the night before… so, I told him, and we were all caught up. All kidding aside, I really do lay out all my thoughts on economics and the markets. Shy of a few expletives, you get my raw thoughts on things. That said, my guy who reads my note every day said something like, “so you are a Fed expert, that’s your thing, right?” Did you know that there are folks who actually make a living by being Fed experts? It’s true, and I get it, because the Federal Reserve is the most powerful group of individuals in the world. No bombs, tanks, aircraft carriers, or boots on the ground necessary… no, just a bunch of suit-donning, calculator-mashing, chart-studying economist-bankers who, with a swish of the pen, can make or break your summer holiday… or your kids’ inheritance. Ya, so there are folks who dedicate their lives to understanding what the “bank” is doing and what it may do next. They are experts at reading between the lines, though there may not always be any hidden messages 😉. They each have their own calculation for what R-star or r* is. Oh, that’s just the level of rates that is considered to be neutral, meaning rates are neither supporting nor holding back the economy. They follow every speech, all the official releases, and the growing list of Fed-created indicators. It’s a full-time job, believe me.

My relative, based on volume of my daily notes dedicated to the Fed, not surprisingly came up with his thesis that I am one of those folks who dedicates their existence to reading the Fed tea leaves. I don’t blame him, and you may feel the same way based on your own survey of my musings. I feel like now might be a good time to admit something very personal to you. When I dip my pen in ink each morning, I try desperately to write about something other than the Fed and inflation. Sometimes I am successful, though ultimately the Fed finds its way, somehow, into most of my notes. It is my mission to give you the information necessary to understand why the markets are behaving the way they are. We cannot control the markets, but by understanding their behavior, we may be in a position to increase our probability of success… assuming that we are disciplined, and we do our homework (which I also preach often).

Given the opportunity, I would write an entire book on how to select stocks and bonds with high, but very understandable, detail. I would save you from the unnecessary, gory detail employed by most financial folks, because most of that detail is supplied to you to make the suppliers seem smart and you feel… um, underpowered. I would do that… and I will someday, but for now, I can only supply you with the necessary information to tackle the markets in the days and weeks ahead, while sprinkling in some of those techniques. You see, I can only fit so much in a note designed to be read in under 15 minutes.

So, here is the thing. There are many, many things that affect your portfolio on a daily basis, least of which is all the stuff I would put in my book, but I can tell you that, right now, the most powerful driving force in the market today is… none other than the Federal Reserve and its policy. Driving the Fed is inflation and all the economic indicators that may portend trend changes in it. I can explain to you why NVIDIA keeps going up or why GameStop should not be trading up, but at the end of the day, it is the Fed that is in control of the tide. That tide on which all ships go up or down with. So, am I a Fed expert? In today’s market, you had better believe that I am! Now that we got that out of the way, I want you to know that the week ahead will feature not only the PCE Deflator, which is the Fed’s favorite inflation indicator, but also Personal Income, Personal Spending, Initial Jobless Claims, Durable Goods Orders, and MNI Chicago PMI. Why? Because all of those will inform what the Fed might do next with policy. And that policy WILL determine the quality of your summer holiday… and the value of your portfolio. Full disclosure: I was not planning on writing about the Fed today 😉.

ABOUT THOSE STOCKS… IN THE PREMARKET

ResMed Inc (RMD) shares are lower by -11.58% in the premarket after a Citi downgrade. The downgrade came after Eli Lilly & Co shared results of trials which showed that use of its weight-loss drug helps reduce sleep apnea. ResMed makes CPAP devices which are widely used to treat apnea. This is not the first case of the weight-loss drug reducing the weight of other unrelated stocks in your portfolio. Dividend yield: 0.93%. Potential average analyst target upside: -1.1%. WHY IS THIS NEGATIVE? Because the current trading price of the stock is higher than the median analyst target price. While this can mean that a stock is expensive, it does not mean that it cannot trade higher.

Micron Technology Inc (MU) shares are higher by +1.73 after Citi named it a top pick ahead of its earnings announcement later this week raising its price target for the memory chip maker. In the past 30 days 18 analysts have increased their price targets while none has lowered them. Dividend yield: 0.32%. Potential average analyst target upside: +12.6%.

FRIDAY’S MARKETS

NEXT UP

• Dallas Fed Manufacturing Activity (June) may have improved to -15.0 from -19.4.
• Today’s Fed Speakers include Waller, Goolsbee, and Daly.
• The week ahead will feature regional Fed reports, more housing numbers, Consumer Confidence, GDP, Durable Goods Orders, Personal Income, Personal Spending, and PCE Deflator. Download the attached economic calendar for times and details.