It was a choppy week for the major stock averages as macroeconomic data once again came in above expectations. Most notable: The final revision for third-quarter gross domestic product jumped 0.3% from its prior reading, while the November annual core personal consumption expenditure price index showed a slight 0.1% rise. Since that the market’s primary concern is inflation and the Federal Reserve’s actions to fight it, stronger-than-expected readings are not a positive. They support the notion that the Fed will stay aggressive in higher rates for a longer period. The Dow gained 0.9% for the week, while the S & P 500 fell about 0.2% and the Nasdaq Composite lost 2%. While the economic environment remains problematic for the bulls, we remain steadfast in our view that long-term investing in great companies is the best way to achieve one’s financial goals. It’s easy to advise investors to sell everything. But that misses the point that stocks represent ownership in companies. And while all companies go through difficult periods, investors are ultimately rewarded for doing the homework and sticking with those companies that have strong fundamentals and can weather the tough times. Remember, the idea is to buy low and sell high and generally, you aren’t going to be able to buy low when everything is great and there isn’t a worry in the world. As hard as they are to live through, bear markets are where long-term investors make their money. That’s why we stepped up to the plate this week and did a bunch of buying. It’s not that we take pleasure in the pain of putting money to work in a market that is likely to remain under pressure for some time. The first half of 2023 will likely be as tough as the Fed says, as it does everything it can to get inflation tracking back toward its 2% target. But our homework tells us that the names we are adding to have strong underlying business fundamentals with competitive moats and will prove undervalued at current levels as the headwinds of inflation, Covid in China and the Russian war in Ukraine abate. On the bright side, we see relief in 2023. Inflation, though still high, is trending back down. China has pulled back from its zero-Covid policy (though is not paying the price for its stubbornness in refusing to accept foreign help and appears to be going down the path of vaccination by mass infection) and there are signs Russian President Vladimir Putin has had enough of his unjustified invasion of Ukraine, stating on Thursday “we will strive for an end to this [war], and the sooner the better, of course.” Lastly, as we head into the final trading week of the year, we want to wish all of our members the best this holiday season! As a reminder, the markets will be closed on Monday, Dec. 26. Under the hood, energy led to the upside followed by utilities and financials while consumer discretionary led to the downside followed by technology and communication services. Meanwhile, the U.S. dollar index is holding just under the 105 level. Gold remains about $1,800 per ounce. WTI crude prices are hovering at around $80 per barrel region while the yield on the 10-year Treasury stands at around the 3.75% level. Looking back There were no earnings reports from portfolio names this week. On Tuesday, we learned that housing starts fell 0.5% monthly (-16.4% annually) in November to a seasonally adjusted annual rate (SAAR) of 1.427 million, above expectations for a 1.4 million SAAR. Meanwhile, building permits were down 11.2% monthly (-22.4% annually) at a 1.342 million SAAR, below expectations for a 1.48 million SAAR. On Wednesday, existing home sales were reported to have fallen 7.7% monthly (-35.4% annually) in November to a SAAR of 4.09 million units, below the 4.17 million SAAR expected. On Thursday, we got the final reading of gross domestic product for the third quarter, pointing to a 3.2% advance, an increase from the 2.9% rate we saw in the second reading. Also Thursday, initial jobless claims for the week ending Dec. 17 came in at 216,000, an increase of 2,000 from the prior week, but below expectations of 222,000. On Friday, the personal spending and income report for the month of November showed a 0.1% monthly increase in spending and a 0.4% monthly increase in income. More importantly, the PCE price index (the Fed’s preferred measure of inflation) was up 4.7% versus the year ago period, slightly above the 4.6% we were looking for. Lastly, we got November new home sales on Friday, which pointed to a 640,000 SAAR, above the 600,000 SAAR expected. What’s ahead Earnings season is nearly over. No portfolio companies report next week. Here are some other earnings reports and economic numbers to watch: Monday, December 26 Market closed Tuesday, December 27 After the bell: Green Tree Hospitality (GHG) Wednesday, December 28 After the bell: Cal-Maine Foods (CALM) 10:00 a.m. ET: Pending Home Sales Thursday, December 29 8:30 a.m. ET: Initial Jobless Claims Friday, December 30 No earnings or data (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Traders work on the floor of the New York Stock Exchange during morning tradingon December 02, 2022 in New York City.
Michael M. Santiago | Getty Images
It was a choppy week for the major stock averages as macroeconomic data once again came in above expectations.
Most notable: The final revision for third-quarter gross domestic product jumped 0.3% from its prior reading, while the November annual core personal consumption expenditure price index showed a slight 0.1% rise. Since that the market’s primary concern is inflation and the Federal Reserve’s actions to fight it, stronger-than-expected readings are not a positive. They support the notion that the Fed will stay aggressive in higher rates for a longer period.
