June 25: Geopolitical risks related to the oil supply shock are beginning to show signs of becoming less bad. In the long run, increased efforts toward pipeline construction among several Middle Eastern countries should reduce future risks associated with the Strait of Hormuz.
The Fed appears to have settled into a holding pattern regarding interest rate changes, although there is a bit of a lean among the Fed’s board of governors toward raising rates at this time. Current inflation rates are around 4% to 5%, depending on whether one looks at the core rate (no food or energy) or the all-inclusive headline rate.
Inflation will not decrease very quickly because it takes a long time to recover from supply-side disruptions. Moreover, the administration’s environmental destruction policies will invite more weather-related supply-side disruptions on their own. Then there are the directly self-inflicted supply-side disruptions and price increases from the administration’s attempts to increase tariffs further. Because of these reasons, inflation may remain elevated for years.
Growth rates around the globe have generally decreased as a direct result of oil supply and tariff-related supply-side disruptions. The U.S. economy has also slowed, but its growth rate is still positive, and the labor market appears to have stabilized. There is no reason to be overly optimistic about GDP growth, but AI-driven earnings growth appears to remain fairly robust. For example, Micron Technology (memory chips) recently blew out earnings estimates. Thus, the stock market remains in a bull market, providing support for those with a positive outlook for financial investment.
Some growth stocks to consider include: NEXA, NHYDY, TREE, GCD, SNEX, ATLC, MCY, DVA, and CBOE. Stocks providing dividends and growth include: APC, MOV, TX, AMBP, BBDC, LYB, MITT, PAGS, and RIO. Over the previous three months, the fastest-growing ETFs were all in the semiconductor sector. From most to least fast, these were: FTXL, SOXX, XSD, SOXQ, and PSI. Good investing!
