Howard Capital Management Reviews - Wealth Watch & Global Weekly Summary

HCM - Global Weekly Summary - June 17, 2024

The Fed’s ‘wait and watch’ approach, weakening inflation and trouble for the Petro-Dollar

  • POSTED BY: EDITORIAL TEAM

Global capital markets went through a week of major developments. The most recent CPI print in the U.S. brought relief as it came in lower than expected. Despite the fall, the Fed kept rates unchanged in June, waiting for stable inflation rates closer to its target of 2%. The technology leaders in the U.S. had a strong week and powered the rally in the country’s equity market. Oracle signed deals with Microsoft, Google, and Open AI to develop their cloud infrastructure, Nvidia split stocks 10-for-1, and Broadcom announced a similar split after their second-quarter earnings beat market expectations. Up on Capitol Hill, Republicans lobbied to extend the Trump tax beyond 2025 and increase the tax cuts for corporations. Elsewhere, European stocks fell during the week after rising political uncertainty gripped France and China’s CPI edged up month-over-month owing to a surplus in domestic demand. In geopolitical developments, Hamas tempered its ceasefire negotiations with a hardened stance on the withdrawal of Israeli forces, while the Houthi rebels continued to disrupt shipping channels in the Red Sea using boat and missile attacks.

Global Updates

  • The MSCI All-Country World Index had a tumultuous week and ended lower overall. The index initially plummeted after French President Emmanuel Macron dissolved the French assembly and called for snap elections. Later in the week, the announcement of soft U.S. inflation numbers helped the index recover some ground.
  • In the U.S., new claims for unemployment benefits increased last week, and producer prices unexpectedly fell in May, keeping alive hopes that an interest rate cut by the Federal Reserve may be on the horizon. As a result, the S&P 500 and Nasdaq rallied and registered record closing highs during the week.
  • Brent Crude and WTI Crude futures recovered on rising global demand after a steep fall from 2-week highs following an increase in U.S. inventories of crude oil by 3.73 million barrels.
  • China’s CPI edged up by 0.3% while producers’ prices declined, signaling a stagnant domestic consumer demand. Chinese carmakers accelerated plans to build factories in Hungary and Poland after the E.U. imposed an additional 38% tariff on electric vehicles imported from China.
  • Saudi Arabia chose not to renew its 80-year petro-dollar deal with the U.S.A., which expired on the 9th of June. Saudi Arabia can now sell oil and other goods using different currencies, such as the Chinese RMB, Euros, Yen, and Yuan, instead of only U.S. dollars.
  • The Argentinian senate approved a package of free market reforms and fiscal actions to attract foreign investment and resuscitate its economy.

U.S. Equity

  • The S&P 500 & Nasdaq composite rallied, with technology stocks leading the way yet again and softer-than-expected consumer inflation numbers. The Dow Jones index fell during the week.
  • U.S. inflation slowed to 3.3% in May, with cooling inflation for food, shelter, transportation, and apparel. The 30-year mortgage rate also dipped by 18 basis points. Employers added 272,000 new jobs in May and hourly wages rose 4.1% even as the unemployment rate rose to 4%.
  • The Fed kept rates unchanged during its June meeting and has projected only one rate cut this year, while its outlook in March included three quarter-percentage-point reductions.
  • Oracle stock has surged during the week after announcements of large cloud infrastructure deals with Google Cloud, Microsoft and OpenAI.
  • Apple’s market cap increased by 7% to the tune of $215 billion fueled by the announcement of its new AI powered developments and ChatGPT integration.
  • KKR, CrowdStrike, and GoDaddy equities advanced with inclusion in S&P 500 index rebalancing this quarter, to replace Robert Half, Comerica, and Illumina. AMD stocks fell as Morgan Stanley downgraded the company based on limited potential for financial earnings of AMD’s AI business.
  • Ilit Raz, the founder of AI-powered hiring startup Joonko, was charged by the SEC with defrauding investors for $21 million using delusive capabilities.
  • Terraform, crypto tycoon Do Kwon’s company, has agreed to $4.5 billion penalty and wind down operations to settle its fraud lawsuit with the SEC.
  • Chinese retail brokerage firm Webull was banned by the Tennessee state government on state employees’ equipment.

U.S. Fixed Income

  • The Bloomberg U.S. Aggregate Bond Index recovered this week on Fed’s inaction and cooling inflation.
  • The U.S. 10-year Treasury yield reset to 4.27%, and the yield on the 2-year note reset to 4.72% over the week after major fluctuations.
  • The U.S. Dollar Index marginally fell to 105.22 during the week.
  • The Fed’s Summary of Economic Projections signaled only one rate cut this year, possibly in December. Market priced in 25 bps rate cut in September with 61% probability.
  • Actively managed fixed-income funds have attracted $105 billion investments so far this year, $31 billion higher than last year.

Sources

HCM-030624-063.GWS

Wealth Watch: From the desk of Vance Howard

Steering Clear of Recession Waters – Is The Fed’s Parachute Ready? - June 13, 2024

Chart: SPY 1-year daily

The markets are making a very nice jump up this week. CPI and PPI came in at levels that suggest a slowing economy. The Fed will need to be awake at the wheel so as not to throw us into a recession. We have been positioned well with the current run up. Commodities, or hard assets, were leading the way early this year, but that has switched as hard assets are slowing, and tech and growth stocks are now taking the lead.

Following a softer-than-expected May CPI inflation report yesterday, producer price inflation also surprised to the downside today. It provides a reprieve from faster price growth in the first few months of this year and suggests that PCE inflation, which is the Fed’s target, will also likely ease. Continued moderation in inflation creates room for a Fed rate cut later this year.

Vance Howard on Fox Business News

On Fox Business last week, we mentioned the market is broadening out and we are looking at other areas outside of the Magnificent Seven that have the potential to be very strong investments. As yields and inflation comes down, we anticipate investors to come off the sidelines and participate more in market.

Chart: QQQ 3-month daily

The Producer Price Index (PPI) for final demand fell 0.2% in May, the most in seven months, and contrary to the consensus of a 0.1% gain. It was driven by a 4.8% drop in energy prices, also the most in seven months. Gasoline, specifically, fell an even larger 7.1%. Food prices slipped 0.1%, down for the second consecutive month. PPI ex-food and energy ticked up by less than 0.1%, below the consensus of 0.2%.

Core goods PPI rose 0.3%, while services PPI was flat. Within services, trade margins edged up 0.2%, but transportation and warehousing prices fell 1.4%, the most in over a year.

On a y/y basis, PPI edged down to 2.2% from 2.3% in the prior month, while core PPI eased to 2.3% from 2.5%. Pipeline price pressures, however, were mostly up across the production flow, posing a risk to further disinflation.

Additionally, the PPI for final demand personal consumption also picked up to 2.8% y/y, the most since February 2023. This PPI aggregate correlates strongly with the CPI, and its near-term trend suggests CPI inflation may struggle to come down in the months ahead.

Initial claims for unemployment insurance increased 13,000 last week to 242,000, contrary to the consensus of a modest decline to 225,000. This was the third consecutive rise, pushing up claims to the highest level since August 2023. The four-week average picked up 4,750 to 227,000, the highest read since last September. Although the level of claims is still within its two-year range and low by historical norms, the recent pickup suggests some softening in labor demand.

Who is Howard Capital Management, Inc?

Located in Roswell, Georgia, Howard Capital Management (HCM) is an SEC-Registered Investment Advisor Firm. They aim to deliver professional money management solutions to individuals seeking growth while maintaining a prudent investment approach. The firm offers the use of the HCM-BuyLine®, developed by Vance Howard, CEO and Portfolio Manager at Howard Capital Management Inc., which has been their cornerstone since 1996. This unique stop-loss safeguard is crafted to provide timely guidance during market volatility. The HCM-BuyLine® effectively reduces downside risk by moving from equities to cash and cash equivalents while actively identifying opportunities to boost equity exposure during a market upswing.

“We aim to take emotion completely out of the equation. Trading with emotions, in our opinion, ruins long-term returns.”

— VANCE HOWARD, CEO + PORTFOLIO MANAGER

The HCM-BuyLine® Explained

Would you like to see the history of the BuyLine® in action? Is this a different approach than what you are taking with your current financial advisor? Could the BuyLine® impact your financial plan?

Howard Capital Management, Inc, issues this communication. It is for informational purposes and is not an official confirmation of terms. It is not guaranteed as to the accuracy, nor is it a complete statement of the financial products or markets referred to. Opinions expressed are subject to change without notice. Howard Capital Management, Inc. may maintain long or short positions in the financial instruments referred to and transact as principal or agent. Unless explicitly stated otherwise, this is not a recommendation, offer, or solicitation to buy or sell, and any prices or quotations contained herein are indicative only. To the extent permitted by law, Howard Capital Management, Inc. does not accept any liability arising from using this communication. Howard Capital Management is an SEC-registered investment advisor that only does business where it is properly registered or is otherwise exempt from registration. SEC registration does not constitute an endorsement of the firm by the Commission nor indicates that the advisor has attained a particular skill or ability. Past performance is no guarantee of future results.

This newsletter is a publication of Howard Capital Management, Inc. It should not be regarded as a complete analysis of the subjects discussed, nor should the newsletter be construed as personalized investment advice. All expressions of opinion reflect the author's judgment as of the publication date and are subject to change. It should not be viewed as legal or tax advice. Always consult an attorney or tax professional regarding your legal or tax situation. There can be no guarantee that the HCM-BuyLine® indicator will perform as anticipated. Stoploss protection will not necessarily limit your losses to the desired amounts due to the limitations of the HCM-BuyLine®, market conditions, and delays in executing orders. It is not an actual stop-loss order that automatically sells securities in the portfolio at a certain price.

Who is Vance Howard?

Vance Howard embarked on his professional career in the financial industry in 1992, establishing Chartered Financial Services, Inc. He subsequently founded Howard Capital Management, Inc. in 1999, a fee-only Registered Investment Advisor. Mr. Howard brings expertise in the analysis, creation, and execution of diverse trading strategies.

Prior to his focus on financial services, Mr. Howard founded Delta Waste Services in 1988, a waste management company he later sold in 1992. Additionally, he co-published investment-focused newsletters, "The Savvy Investor" and the "SI Intermediate-term Trader", which garnered an international readership across over 25 countries between 1992-1999.

Demonstrating a commitment to community, Vance has served on the Huntsville, Texas city council for four terms, including two terms as mayor pro tem. His civic involvement extends to roles such as Huntsville's City Finance Chairman, Chairman of the Huntsville/Walker County 911 Emergency Service, and board positions on the Houston/Galveston Economic Development Council and the District 910 Legal Grievance Committee. He is a former President and active member of the Huntsville Rotary Club.

Outside of the professional sphere, Vance collaborates with family members in the operation of the Bar C Ranch in Madisonville, Texas, where they specialize in raising registered longhorn cattle. His leisure interests include travel with his wife and children, cycling, kayaking, scuba diving, and hiking.

Howard-Vance-color-4.png

Who is Vance Howard?

Vance Howard embarked on his professional career in the financial industry in 1992, establishing Chartered Financial Services, Inc. He subsequently founded Howard Capital Management, Inc. in 1999, a fee-only Registered Investment Advisor. Mr. Howard brings expertise in the analysis, creation, and execution of diverse trading strategies.

Prior to his focus on financial services, Mr. Howard founded Delta Waste Services in 1988, a waste management company he later sold in 1992. Additionally, he co-published investment-focused newsletters, "The Savvy Investor" and the "SI Intermediate-term Trader", which garnered an international readership across over 25 countries between 1992-1999.

Demonstrating a commitment to community, Vance has served on the Huntsville, Texas city council for four terms, including two terms as mayor pro tem. His civic involvement extends to roles such as Huntsville's City Finance Chairman, Chairman of the Huntsville/Walker County 911 Emergency Service, and board positions on the Houston/Galveston Economic Development Council and the District 910 Legal Grievance Committee. He is a former President and active member of the Huntsville Rotary Club.

Outside of the professional sphere, Vance collaborates with family members in the operation of the Bar C Ranch in Madisonville, Texas, where they specialize in raising registered longhorn cattle. His leisure interests include travel with his wife and children, cycling, kayaking, scuba diving, and hiking.