Weekend Investor: The Week That Was

I hope you had a wonderful week!

It may be summer, but that doesn’t mean the market has slowed down. The S&P 500 was up 2.58% this week, the Federal Reserve paused rate increases, and the AI hype continues.

In case you missed it

Here’s some of the content I put out this week. Enjoy!

• Spotlight on Portillo’s: The latest Asymmetric Investing Spotlight is out for premium members. This week, I covered the restaurant company Portillo’s. I think this could be a company that generates Chipotle or Buffalo Wild Wings-type returns.

• Peloton Update: One of my early spotlights was Peloton. The company recently updated its app and added new subscription options. It’s clear the future of this company isn’t selling premium bikes, it’s being the fitness company for anyone, anywhere, any time.

• Ideas vs Conviction: I can provide you with investment ideas and research here on Asymmetric Investing, but I can’t give you my conviction. That you need to develop on your own.

• Stacking the Deck: How do regular investors beat the market? Stack the advantages we have over the market together and you have a recipe for success.

• Don’t Count Disney Out: Disney stock is out of favor, but Bob Iger has some big growth levers to pull over the next year.

The Fed Changes Course…Sort Of

This week, the Federal Reserve paused rate hikes and left the short-term rate target at 5% to 5.25%. But they said more rate hikes are likely coming and the market expects two more increases this year.

Raising rates is a balancing act and after increasing rates at an unprecedented pace over the past year, this pause is a welcome reprieve for markets. Now the market is going to watch:

• Inflation, which has cooled but may be stubbornly high (3-5%) for an extended period of time like it did in the mid-1980s.

• Housing continues to see fewer transactions but hasn’t entirely frozen, which is a positive sign. Housing is about 18% of the U.S. economy and most homes are bought on leverage (mortgages), so any decline in prices will be acutely felts by homeowners. They are already cutting back on remodeling (according the Home Depot’s falling comps), so killing housing by raising rates too far is a huge risk.

• Auto sales are a key economic driver and higher rates will ultimately lead to fewer sales. But there was latent demand after the market was undersupplied for three years, so we haven’t seen much of a slowdown yet. The worst could still be ahead…

• Unemployment continues to be extremely low and outside of tech companies, there haven’t been large layoffs.

• The Fed has caused billions of dollars in losses at banks, which could face the type of runs we saw at Silicon Valley Bank in the spring.

• Commercial real estate is…screwed. Maybe the Fed doesn’t care at this point?

On top of raising rates, the Federal Reserve is actually pulling liquidity from the market in an unwinding of what was called quantitative easing. In theory, that means asset values should drop because there’s less excess cash with which to buy assets, but that’s not what we’re seeing yet.

I don’t worry about interest rates too much, but being aware of the headwinds or tailwinds the market faces from the Fed is important for any investor. We should be heading into some serious headwinds, but that hasn’t manifested in fewer jobs, less consumer spending, reduced borrowing, or a falling stock market…yet.

Is This a Bubble?

Probably. But where exactly is the bubble and when will it burst? I have no idea!

One of the reasons I invest in the Asymmetric Investing Portfolio each month is that I’m not able to time the market.

If this is indeed a bubble, I’ll buy some stocks at elevated values. But after the bubble bursts, I’ll be ready to buy at discounted prices. As long as I’m buying great companies with asymmetric potential, the timing of when I buy will be lost to the sands of time.

Disclaimer: Asymmetric Investing provides analysis and research but DOES NOT provide individual financial advice. Travis Hoium may have a position in some of the stocks mentioned. All content is for informational purposes only. Asymmetric Investing is not a registered investment, legal, or tax advisor or a broker/dealer. Trading any asset involves risk and could result in significant capital losses. Please, do your own research before acquiring stocks.