Back in January, I wrote, “Now we are facing another alarming trend, what I call ‘The Fed Disaster Plan,’ raising interest rates in a fast and furious fashion, causing a potential recession, a prolonged bear market on Wall Street and perhaps even a monetary crisis in 2023.” That crisis is now in full swing, writes Mark Skousen, editor of Forecasts & Strategies.
But not all is lost. One of the big surprises last week was the rally in technology stocks. The Technology Select Sector SPDR Fund (XLK) jumped 13%, led by Microsoft (MSFT), Nvidia (NVDA) and Apple (AAPL).
Microsoft, in particular, came alive thanks to its cloud segment, which grew 29% in the second half of 2022. Overall, Microsoft generated more than $20 billion in profits in the past quarter, translating into an operating margin of roughly 40% of sales -- far ahead of Apple and Meta Platforms (META).
The outlook for earnings and cash flow are bright, too, in part thanks to cost-cutting and solid sales trends in cloud services. Microsoft delivered $9.7 billion to its investors last quarter, which was about evenly split between dividends and stock repurchases.
Meanwhile, gold, silver and Bitcoin have rallied sharply in the past week in response to the growing banking crisis that has now infected Europe.
Plus, the rise in safe money market funds, now yielding 4.5%, has encouraged investors to draw money out of commercial banks, whose institutional money is tied to long-term bond prices. These have plummeted during this past year -- all in response to the Federal Reserve’s overly aggressive tight money policy. I recommend the Schwab Money Market Fund (SWVXX).
The bank run is real, and the Biden administration and the Fed are trying to shore up bank assets by insuring all deposits, even those valued over $250,000. The banking crisis has also spread overseas, as Credit Suisse (CS) ran into trouble and is being bought out by its long-term rival UBS (UBS).
The biggest beneficiary is gold. The SPDR Gold Shares (GLD) was recently up 9% year to date.
Recommended Actions: Buy SWVXX, GLD, XLK.
