Big Market Events & High Quality Bonds

Dear Traders,

There are some big things happening in the market these days. The retail sales number came in yesterday at -1.5%. Considering inflation is at 7%, this reflects a significant drop in consumer spending. The economy has cooled down, and consumers have backed off. The market sold off and continues to sell off.

Today, the market was extremely choppy at the Open, and I had a few bad losses on TSLA and Amazon. Although there is not much learning content in the recap, we decided to post it nonetheless. You can watch it here.

Ardi and I checked out Interactive Brokers on the TWS platform and saw there are some high-quality bonds that yield at over 7%. Historically, the stock market gives around an 8% return. Why would anyone invest in the stock market these days? It does not make any sense. That is why the stock market is going to have a hard time moving higher in 2023 and most likely will trade in a choppy range but with volatility. Below is an image showing investment grade bonds with a 7% return at the Bank of Nova Scotia, a solid Canadian bank that one can invest in with high confidence. This of course is only true for many solid investment grade bonds.

Signs that central banks are slowing down on rate hikes, coupled with a slew of downbeat data, are spurring a bond bonanza for both issuers and investors. The rush to safer assets is fueling the best start to a year for bond returns and sparking a more than half-trillion dollar boom in debt sales by governments and corporates around the globe.

Earnings season is starting, and NFLX is the most famous company reporting today. We are experiencing some amazing trading opportunities this earnings season. TSLA is in a price war with automakers due to how sharply it has reduced its prices. Elon Musk has yet to see the results of this price war battle, but everybody knows there is no winner in a price war. Major corporations such as Toyota, Ford, or the German automakers can also enter this war, especially if they have leverage over Tesla because of a diverse portfolio of products. For instance, Ford can lose money on its electric fleet, but make money on its F-150. It will be nice to see what the electric car price war will reveal.

On the other hand, while tech companies will be laying off more people, the largest number of layoffs will not be coming from Silicon Valley but from Main Street. With high interest rates, and a cooling down in real estate construction, a big wave of layoffs may come this year. The Federal Reserve is expecting an unemployment rate of 4.9% in their latest reports, but we are far from that right now.

I believe the market will not bounce until something breaks down!

Tonight, for Thursday Mentorship, Thor is up at 8pm ET. I encourage everyone to join Thor for his Thursday mentoring sessions as he dives deep into the questions posed by the community and provides detailed answers and examples. It is definitely well worth your time.

To your success,
Andrew

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