It has largely been a quiet week despite post July 4th fireworks in the Iran war. For the week, the S&P looks to finish up nearly 1%. Importantly, the index pushed through resistance (now support) at the 7500 level. From a technical perspective, we are in a wide trading range but on the verge of a new uptrend. If the S&P can push to new highs (1.5% from current levels), a new uptrend will have been established (higher lows and higher highs). A good earnings season could be the impetus for another leg higher. While we are not complacent, we do like the way this market is digesting and handling bad news.
After spiking into the 20’s a few times over the last couple of months, the VIX has settled back down into the teens. A VIX in the teens is an indication that the markets do not anticipate undue volatility over the coming month. It is much easier for the markets to trend higher with a VIX at these levels. The yawning of the VIX is also confirmed by the recent movement in high yield bonds. Despite another round of Iran attacks, the markets seem unconcerned about any longer-term effects on the US economy.
Our Point
Renewed tensions in the Middle East and the failure of the Memo of Understanding to hold for any length of time, did little to sour Wall Street. After a couple of days of losses and some volatility, the markets are back where they were a week ago. Both the S&P and Nasdaq are not far from their recent highs. The S&P is 1.5% off its highs and the Nasdaq is 4.5% off the highs. Semiconductors (which led the Nasdaq surge off the April lows –up over 100% during that time) have taken a breather (down 14% since June 22nd). The profit taking in this sector has had an undue effect on the Nasdaq index. A couple of our holdings have been affected but we do expect the sector to stabilize and resume its leadership role. Next week will be a busy one with inflation reports (CPI and PPI) and earnings season starting in earnest. Should the inflation reports come in stronger or weaker than expected, it could cause a shift in the Fed’s interest rate thoughts. We’ll also get a slew of big banks reporting their earnings. JP Morgan, Citi, Goldman Sachs, Bank of America, Wells Fargo, Morgan Stanley, etc… are among the more important and notable names all reporting next week. Any/all of these earnings could move the market. We will be watching closely. Retail sales on Thursday will give a fresh read on the health of the consumer. Finally, new Fed Chairman Warsh will be testifying on Capitol Hill Tuesday and Wednesday. The testimony will be on the heels of the newest inflation data and could yield new information on the Fed’s thinking on future rate cuts/hikes. It will be a busy week with lots of potential pivot points for the market. Buckle up! We made no changes to our holdings this week. We are mostly fully invested in our moderate and aggressive portfolios and have a little bit of cash in our conservative portfolio. Nearly 55 years ago, the Bills family started a family tradition of going to the South Carolina coast for a summer beach trip. Then it was 5 of us. That tradition has continued every year since, with the Bills family growing from 5 to 32 with another one on the way! Next week, 29 of the 32 will be gathered for another fun and chaos filled week sharing two houses on the beach of Pawleys Island. There will be lots of food, drink, fun, laughter, sun, a few tears (good and bad ones), and another year of memories. It is always a great time. Since Carter and I will be traveling next week, there will not be a market note unless market conditions dictate. As always, however, we will be available for any questions or concerns. Enjoy your weekend wherever it finds you.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Bills Asset Management (“BAM”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from BAM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. BAM is neither a law firm, nor a certified public accounting firm, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of BAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at www.billsasset.com.
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About Bo Bills
Founder and Chief Investment Officer at Bills Asset Management. With over 30 years of experience in managed risk investing, Bo has helped countless clients achieve their financial goals while preserving capital.
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