Update - May 24, 2022

This Market Will Reward the Patient

Let’s be clear… Snap (SNAP) is not in our portfolio. But the owner of social media stronghold Snapchat certainly deserves our attention.

Shares of the company plunged this morning as it sent out a warning flare.

“The macro environment has deteriorated further and faster than we anticipated,” its boss said.

The company will miss its earnings estimates and will slow hiring.

What’s worth noting is that the figures CEO Evan Spiegel is tossing out the window aren’t old. They weren’t issued last year (when we were warning of the coming recession). They weren’t even issued during the first quarter. They were issued just last month.

That shows how quickly things have moved since the Fed turned ultra-hawkish.

As investors figure out what to do with Snap’s figures this morning, the folks at Abercrombie & Fitch (ANF) hit us with some news of their own.

Yes, sales beat expectations in the first quarter… but costs soared.

Things have gotten so volatile that the company now refuses to offer full-year guidance on its gross profits or operating expenses. It’s just too risky, Abercrombie says.

But it did cut its net sales projections in half – blaming foreign currency woes and inflation’s effect on consumer demand. For the current quarter, it expects sales to slip by a number in the low single digits.

Shares dipped on the news by more than 20%.

This is not good.

There is no sugarcoating it. The economy is slowing quickly.

But here’s the thing. At nearly the same time that these companies are plunging, the predictions of a recession are rising (talk about pointing out the obvious). And as they are, I’m seeing an increased number of headlines discounting the idea of the “Fed put.”

The mainstream narrative says it’s dead. It says the idea that the Federal Reserve will ease back on its rate hikes and even stimulate the economy with fresh cash is out the window. Inflationary pressure is simply too high.

The folks saying that are right… It would be stupid to print more money right now.

But stupidity and monetary policy have skipped hand in hand down the beach since August 15, 1971… when Nixon tore up the gold standard.

By the end of this year, Jay Powell and his troops will hang their “Mission Accomplished” banner on Constitution Avenue. They’ll claim to have broken the back of inflation and will once again tout a policy of easy money.

After that… it’ll be on to negative interest rates.

It’s the only option.

We’re doing exactly the right thing. These days, it’s quite tough to avoid the pain. Even going to cash is a killer idea. But this downturn will be short-lived, and today’s buyers will be rewarded.

I’m certain of it.

Our strategy has us seeking out the very best opportunities… no matter where in the world they are.

My latest recommendation, Wipro (WIPRO.NS), hits on the idea.

We went after an international blue chip for several reasons – chief among them, foreign currency exposure and diversifying into a company with operations around the globe (including a home base that’s in the heart of one of the fastest-growing economies on the planet).

This is a market that will reward patience. It’s looking to shake out the weak players and those who don’t have a strategy. For them, it will be tough.

But we have a strategy… a proven strategy. The theory behind our Modern Asset Portfolio is tested and sound. It focuses on what has proven over and over to be the ultimate driver of wealth… real interest rates.

They’re in flux right now. But opportunity will come with the pain.

Be patient. We’ve gotten it right so far. In fact, I’m proud to say we’ve nailed it.

Stay the course.

Note: In a Zoom call with our beloved Alpesh Patel last week, the “Queen’s Dealmaker” outlined his plan for this market. He’s focusing on the “special opportunity” plays that have erupted. I’m confident he’s going to lead his followers out of this mess. You don’t crush the market for as long as he has unless you’re the best of the best. Here’s his latest big interview and market advice.