Rate of Return by Austin Hankwitz

Already a third of the way through April.. where does the time go?

Wishing a Happy Easter and Passover to all of those celebrating. Not to mention — a Happy Master’s Sunday as well. Read on for your quick recap of the last week in the markets! We loved this viewpoint via zerohedge — see below for the relationship between money market fund holdings and bank deposits (with bank deposits having an inverted relationship). Over just the last couple of months, inflows have been pouring into money market funds.

Happy Wednesday! A few months ago, a loyal Rate of Return subscriber emailed me asking to audition for the co-hosting position of a custom podcast he was working on at iHeartRadio. On Thursday (3/30), Mind the Business: Small Business Success Stories made its public debut — our first episode was an interview with Sika Health’s founder and CEO, Ami Kumordzie.

Americans just took another punch. Over the weekend, eight OPEC+ producers sent a shockwave around the world — unifying to cut oil production by -1.16 million barrels per day. This adds to Russia’s existing cut of -500K barrels per day from its own production, which was announced in February.

Welcome to April. As you can see below in the fourth batch of columns from the left ‚ÄĒ April is historically a very strong month in the market. The Nasdaq 100 has officially entered a bull market ‚ÄĒ up over +20% since its December lows. In fact, the Nasdaq 100 just had its best-performing week since 2010. With Q1 ending, it‚Äôs also finalized that the S&P 500 has now posted two consecutive quarters of gains ‚ÄĒ a pattern not seen in any bear market over the past 50 years.

Happy Friday! Before we jump into analyzing the company I’m planning to add to my portfolio — let’s go back in time and reflect on the last few companies we’ve covered here on Rate of Return. In the above post I shared my conviction for both Academy Sports and Outdoors (ASO), and Hims & Hers Health (HIMS). The above performance was largely catalyzed by very strong earnings reports for Q4, as well as higher-than-expected guidance for Q1.

Spring is in full swing. But that doesn‚Äôt mean that we can leave the ugly banking problems back in the winter. As you can see above, banks‚Äô exposure to risk is both complicated and multi-faceted. More than anything ‚ÄĒ commercial and industrial real estate are in focus. Small banks hold $2.3 trillion in commercial real estate debt ‚ÄĒ or roughly 80% of commercial mortgages held by banks.

If that terrifying quote from a former Fed official isn’t enough to get your attention, see below from Morgan Stanley (via Carl Quintanilla): What happens when one or more of these five things are happening? S&P 500 forward earnings guidance declining. Yield curve inverted. Unemployment below average. Manufacturing PMIs < 50. 40%+ of banks tightening lending standards.

In case you missed our last personal finance-focused post ‚ÄĒ Be Better with Your Money in 2023 ‚ÄĒ I‚Äôve shared it below. We walk through creating your first budget, investing toward retirement, and paying off high-interest debt. This post is going to be sort of a follow-up to that one ‚ÄĒ but this go-around I‚Äôm going to assume you‚Äôve been able to build that budget and you‚Äôre beginning to find extra money in your bank account every month that you‚Äôre not too sure what to do with.

If the Fed‚Äôs goal was to ‚Äúbreak something‚ÄĚ ‚ÄĒ it seems like the ‚Äútrust‚ÄĚ in small-to-medium-sized banks is becoming quite broken. And the reactions in the treasury market shows that there may be more problems ahead. Remember ‚ÄĒ when the yield curve (10s minus 2s) is inverted, it reflects that bond investors believe there will be a decline in longer-term interest rates. This is typically associated with recessions. An inverted yield curve is the investor‚Äôs way of saying..