|So on July 6 I posted my bullish case for stocks and followed up with a bearish post on August 14. I think I will retire from market timing at this point and rest on my laurels. I am more uncertain about the economic future then I've been in quite a while, maybe since the early weeks of COVID shutdowns. The Ukraine war is going pretty well for Ukraine, Russia has clearly lost, but I was hoping that Ukraine would have collapsed the Russian army entirely by now and the war would be over before the rains and mud of October come. The generals I follow now seem to think that full Ukrainian victory wont happen till next June. That would be more bearish than I had originally felt, but the global impacts have moderated. Ukrainian grain is shipping, and oil prices have come way down and are no longer a driver of inflation. Most of the commodity inflation of the first half of 2022 has unwound itself. The biggest impact now is on European energy markets, where the lack of Russian nat gas is pushing up the costs of electricity and will likely require gas rationing this winter to both consumers and industry.|
Meanwhile, inflation in the US seems more embedded than it did earlier this year. While oil and other commodities are backing off, core inflation is still about 4-5%, and Powell is determined to crush it. Hard to believe that at the first Fed meeting this year the vote was 9-0 to keep interest rates at 0. Two months ago I thought we would see peak Fed funds rate at 3.5%, now it looks more like 4.5%. This is really pushing down stock prices as the street factors in higher interest rates and a rising risk of an actual recession that hits profits. At some point Powell will declare victory, and then we will see a new bull market born.
My biotechs have fared pretty good in all this, GBT got bought out by PFE, ALT went from 5 to 23 and has backed off down to 13. SRPT soared on news of filing for AA for their gene therapy. ADMA continues to do well and is up sharply this year, though sold off recently. Only FATE has performed poorly. SAVA has also come back from the dead, I'm hoping to sell half of my position once I get to breakeven, still got a ways to go on that. SAVA is still a lottery ticket, but the upside is truly monstrous so it's hard not to own some.