Replies to post #26748 on The Rising Influence of Rising Affluence

[santafe2]

I may have mentioned before that I'm a fan of top-down analysis. What is the market doing, the sector, the industry and finally companies within that industry.

Below are three charts. The consumer discretionary sector, the durable household products industry and WHR. Here's a quick analysis:

The discretionary sector peaked last November along with tech and communications. These are the three most aggressive growth sectors. When we enter a risk-off environment these sectors generally perform the worst. That said, the discretionary sector June low has held so far.

The durable household products industry peaked in May of 2021 and has been falling for almost 18 months. As an industry it's been a dumpster fire, down 59%.

WHR also peaked in May of 2021 and offered a nice head-fake recovery until the beginning of 2022. Their earnings revenue have been falling for 7 quarters. With the pullback and high inventory in new home building it's unlikely builders will begin taking normal deliveries until the Fed backs-off. Likewise, big box stores have too much inventory. Best guess is next spring before we see a turnaround? WHR has done better than their peers, falling 43% since January. A Pyrrhic victory at best.

My POV only: WHR is a strong candidate for income investors as they have a 12 year history of raising dividends and the dividend currently stands at 5.3%. Even with this quarter's horrible earnings the dividend only eats 39% of earnings and FCF is excellent. I would not try to trade it here unless you have a crystal ball. Once the SPX broke below the June low and the Fed maintained their bullish rate raising stance, all bets are off as to when the market bottom may be put in.

Since it appears I was incorrect regarding the Fed's resolve, (we'll know for sure November 2nd), that means I must adjust all my other assumptions. Currently I'm laddering 95% of my cash in 1-month CDs which are paying just over 3% and raising additional cash as I take tax losses to off-set dividends and trading gains.

[procqw2]

In the EU, a typical mortgage rate is the sum of the base rate and the 6-month euribor rate (which itself is typically reviewed every 6 months). The base rate of 1-2% is not unusual. The euribor rate has been zero or negative for years and the low rate should be still effective. The first big shock should come in 1H 2023 when the combined rate rises from e.g. ~2% to ~5%. The extra interest payment could be the cost of an average appliance. What will be IMO especially affected are various smart home solutions, robotic vacuum cleaners, air and water purifying devices, etc.