Uncertainty

The week ended up neutral - the indices gaining back most of what they lost the first two days of the week. Most people are unsure of what that means. No one is sounding the all clear just yet. While some people are buying, others are raising cash. There are very strong conflicting messages coming from both sides. Most market participants are flummoxed, which means there is a strong ‘wait and see’ bias in the market. In general, uncertainty can actually be good for the market, too much euphoria is worrisome.

So why the uncertainty? On the bear side, companies are reporting that labour shortages persist, inflation is a problem and supply shortages are impacting performance. Bulls point out that while that is true, it appears that Covid numbers are coming down, the Fed is in neutral and people are cashed up and ready to spend. In a consumer economy like the US, this is very good news. We also increased productivity over the pandemic so companies are doing more with less. This next earnings season will be very interesting. The better companies will probably do very well, other companies will use supply and labor issues as an excuse to justify weak performance. Some companies have just managed a lot better through Covid.

I tend to lean on the more positive indicators. It feel like the supply constraints are working themselves out, albeit slowly. I would bet more companies are going to manage supply and inflation issues by passing on price increases. Once the supply issues resolve themselves, the higher prices will probably stick, increasing operating margins. While higher prices are not good in terms of inflation, the increases will probably not be widespread or high enough to alarm the Fed longer term.

So the strategy is as it always is, buy if the stock is one you want to own and the price is right. Remember, you buy for the longterm upward trend. Use September’s volatility to rebalance your portfolio. Drops are to be welcome, as it put stocks on sale. And next week we will be doing this all over again.

Market Today: Another up/down day so it was pretty much all options, but equal calls and puts. Took advantage of the downturn in tech to sell some puts there on stocks I want to own, but not to many as I do not want to risk getting put too much in another swish down. I did listen to Nike earnings commentary as it was down over 6% at one point. I think Nike is a good company and I sold a put as I thought it might be time to buy some. With the volatility, the Nike option became less negative at one point so, bird in hand, I bought it back. Look for these kinds of opportunities to get into a stock you want. From what I heard, Nike looks to have simply had a bad quarter due to supply constraints. If it is down again on Monday, I will either re-write a put or buy it outright. 10.4