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💸 Should We Brace For A Soft Landing?
Issue #52 // Dimon's Market Outlook + Stock Analysis
Abbas Akhtar
April 30, 2024
UPDATE
🌤️ Happy Tuesday
Good morning. We hope you had a great weekend. As we wrap up April and head into May, we also enter finals season for those of you in college/university.
To all of our friends with a .edu email who have been tuning in to our newsletter, we wish you the best of luck on exams and prep.
Let's make this a great week 🙌
Read time: 5 minutes
WEEK IN REVIEW
📈 Market Performance
S&P 500 (6-months), via Google Finance
If there's one word to describe the growth of the S&P 500 over the past couple of months, it would be smooth. Since mid-February, we've seen a 1.72% increase in the index, without many significant spikes or dips.
As of Monday's market close, the index sits at 5,116.17 points, a respectable number, but still not as high as many analysts had hoped for. If you remember from late last year, the index (and the market as a whole) had set out on a rally that pleasantly took many by surprise.
Investors were worried that high inflation and losses during the fall of 2023 would continue to hammer down the index and make for a gloomy holiday season. However, the market rebound gave many onlookers hope that the S&P had the potential to grow throughout 2024.
As the growth has flattened out throughout April, analysts seem to agree that the rally has (at least) paused for indexes like the S&P and the Dow.
Remember, this year is an election year in the US and many other developed economies. This means we could see potential volatility as we get close to respective election days, which could boost the performance or erase many of the gains made up until now.
In conversation: read this article by Bloomberg about why some investors believe the stock rally could continue, despite macro pressures.
Despite stock market wins, the economy's biggest foe is still on the loose: inflation. Compared to the inflation rate during the COVID recovery, today's 3.48% rate is a sign the economy is headed in the right direction (the average inflation rate in 2022 was just shy of 8%).
However, this still isn't what the Fed is looking for, as Chairman Jerome Powell has communicated that the goal is around 2%.
While the Fed doesn't generally theorize about the future performance, Jamie Dimon, CEO of the largest US bank JP Morgan Chase, recently offered some insight on where he believes the economy will end up as it finds a new normal.
Dimon told the Associated Press that inflation may be around for longer than some may hope for and that the economic phenomenon stagflation, which happens when growth slows while inflation remains high, is one of many possibilities.
To many, this certainly isn’t great news, and it’s less than ideal that one of the most important bankers in America sees this as a possibility. The Fed has increased interest rates to attack inflation, which slowly puts pressure on the economy. However, the potential to see these efforts backfire is a reality that no one wants.
In conversation: read this CNBC article which outlines some of Chairman Powell’s goals, and this Investopedia article which explains what an economic soft landing is. This is another potential outcome Dimon sees.
ENERGY & COMMODITIES
🥛 April Milk Index Update
MARK IT. Whole Milk Index, via MARK IT. (using USDA data)
The data for milk prices from March and April is here, and the numbers are promising for dairy consumers. February saw a slight spike in average milk prices, to $4.36 a gallon up from $4.33.
That might sound like a little (it’s only 3 cents after all!) but recall that this data is averaged from three distributors across 30 cities. To see a near 2% increase reflected in the national average is something worth paying attention to.
What’s good to see, however, is that the past two months have been an indication that the February spike may have been a one-off increase and that prices will average back down to $4.32-$4.33 per gallon.
We want to hear your feedback on the Milk Index! Send any comments or suggestions to [email protected]
WEEKLY WATCHLIST
🛻 Ford Motor Co (F)
Ford Ranger by Alexander-93, via Wikimedia Commons
In our first stock analysis since last year, we wanted to talk about one of the first companies that MARK IT. analyzed. Ford Motor Co. is a legacy American car manufacturer and one of the many auto companies hoping to be a leader in the transition to EVs.
The announcement of its F-150 Lightning was met with praise as an attempt by an established truck-making brand to venture into EV territory. However, price fluctuations and technology concerns have plagued the car’s success as Ford attempts to hone its strategy.
Since the end of the United Auto Worker’s (UAW) strike in late November, Ford stock has increased a hefty 24%. We wanted to bring this company to your attention as the stock could be potentially leaving undervalued territory after many years in limbo.
F (6-months), via Google Finance
⚠️ Recovering cash flows: While pre-COVID free cash flows saw substantial growth, the company is undergoing a recovery following COVID-era losses.
✅ Great dividend: With a 4.69% dividend yield, Ford has a much higher dividend than the average S&P listed company.
✅ Slightly undervalued according to DCF: While we estimate that a single Ford stock is between 5-10% undervalued, the stock is currently trading at a discount.
🛑 High debt: Of the total Enterprise Value (EV) of Ford, debt is approximately 151.42B compared to a market cap of 51.06B.
ONE MORE THING
🤝 Keep in Touch
For general announcements or updates on what we're working on, follow Abbas on Twitter 👉 @RealAbbasAkhtar
Also, we want to hear your feedback! Send any comments or suggestions to [email protected]
Thanks again for reading!
