SFM Observer - February 2022
Issued: March 3, 2022
The Dow closed the month of February at 33,893 for a drop of -1,240 points or -3.5%. The world is focused on Ukraine and the unprovoked invasion by Putin. Energy prices are spiking with oil trading over $100/barrel and some other commodities increasing on fear of shortages. Inflation continues to surge with the latest monthly reading coming in at 7.5%, well above the Fed target of 2–3%. This year has started out with heightened volatility and we expect more of the same in balance of 2022. The interest rate forecast changes week to week and the stock market either rallies or falls on every shift in outlook. Most of the major indices are in the red this year, but the drops are less than we would expect given the macro and geopolitical environment.
Some interesting events from the month just past:
• Several hundred thousand teachers quit last year and took jobs in the private sector. Stressed out and burned out by trying to teach during Covid, they are headed for greener pastures in sales, healthcare, training and other fields. Some are finding their skills are worth $10-$40k more in the private sector.
• Alphabet (aka Google) announced they are going to do a 20 for 1 stock split this July. This means that a person that owns 1 share of Google today at approximately $2,700 per share will receive 20 shares valued at approximately $135 per share. The same total value but a lower stock price allows a new smaller investor to buy the stock.
• Goodyear Tire company said they are getting hit across the board with rising input costs. The rubber, labor, transportation and energy costs used in manufacturing tires have all risen simultaneously. Management said they can raise prices to offset some of the rising costs but they will not be able to cover all the increases. They forecast lower profits in 2022.
• Volkswagen AG has announced they are exploring a spin-off of Porsche into a separate company. The company would use the proceeds of the sale to fund the expansion of electric vehicles. Based on the terrific success of the Ferrari IPO in 2015, the Porsche IPO would be one to watch.
• Life insurers reported elevated death claims last year due to Covid and also experienced higher claims for heart and neurologically caused deaths. The non-Covid deaths are being attributed to the healthcare system being overloaded and difficulty in maintaining normal health screenings. People were also reluctant to be in a hospital or healthcare facility during the height of the pandemic.
Thank you for reading this issue of the SFM OBSERVER.
Until next month,
Glenn Sweeney CFA