Stock market investors are suddenly faced with more than the usual number of uncertainties. The “hush money” trial of the former president and increasing civil divisiveness over the Israel/Hamas war added to the ongoing ones. The earnings reported for this past quarter were on average very good, but concerns over their sustainability persist.

AI or artificial intelligence seems to be the major driving force for growth. Of course, this only directly impacts a small number of companies. Eventually, it will have far-reaching impact, but that is years off. Remember the advent of the internet. The impact is now ubiquitous, but it took many years, even decades. In the meantime, the basic forces of the business cycle persist.

Inflation has been good for companies and their profit margins. As the Bull wrote early on in this inflation cycle, firms use inflation as cover to pad their own profits, and they have. The ensuing end of this trend will have the opposite effect. Increasing competition and pressure on prices from many sectors will contain if not decrease margins. Investors must guess how much and where these effects will be most pronounced and factor all this into market values.

Since last fall, the stock market has had a great run. Notwithstanding the minor correction we had in April, investors are sitting on terrific profits. This always makes them nervous. They hate the idea of losing those. Therefore, preemptive selling, paring positions, and taking a little off the table seems a natural inclination. We are going through one of those bouts of jitters right now. We are likely to have several of these this year. They will not be the end of the world. The Bull and his partners will manage through these. In the meantime, stay steady my friends.

The Lonely Bull