US markets finished mixed on Wednesday after the benchmark S&P 500 declined 1.6% on Tuesday. The indices reversed course late in the afternoon after the Dow was up more than 500 points. Yesterday’s action coincided with Fed Day, with the Open Market Committee deciding – as expected – to leave the fed funds rate unchanged. Fidelity Magellan (FMAGX) is a domestic stock fund I like, says Brian Kelly, editor of Money Letter.

Chair Powell cited a “lack of further progress” on inflation, which is preventing the central bank from easing interest rate policy. We are in the middle of a volatile period for stocks as higher Treasury yields and some indications of economic slowing are coming together. Fears of stagflation are premature in our view. But given how far the market has come since late October, the volatility is not unexpected.

Our global markets were mostly lower for the reporting period (April 25 – May 1). The S&P 500 finished 1.1% lower; the Euro Stoxx 50 declined 1.4%; the Nikkei 225 dropped 0.5%; the Shanghai Composite was the lone winner, moving ahead by 2.0%. For the year-to-date, the S500 is up 5.2%; the E50 has gained 8.8%; the N225 is 14.4% higher; the SC is up 4.4%.  

There continues to be considerable economic and interest rate uncertainty. The important thing is that it is still likely that the next move by the Fed is to lower interest rates, not increase them. This was confirmed by Powell. It is a view that has allowed stocks to maintain most of the gains since last fall.

Right now, the primary risks for investors are: 1) Inflation re-igniting, and 2) An economic growth scare. Significant regression for either of these important elements is unlikely, in our view. Therefore, as Chair Powell pointed out in his presser, the threat of stagflation is not great.

For domestic stock funds, Fidelity Magellan is a new “Buy.” The fund invests primarily in common stocks. It invests in domestic and foreign issuers. The fund invests in either "growth" stocks or "value" stocks or both. The adviser uses fundamental analysis of factors such as each issuer's financial condition and industry position, as well as market and economic conditions, to select investments.

Recommended Action: Buy FMAGX.

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