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The Week Ahead - Sell The Rumor, Buy The News

May 02, 2022 9:31 AM ETARKK21 Comments


  • The process of exercising speculative valuations out of the market intensified last week.
  • The S&P 500 forward P/E multiple has fallen to its 10-year average of 17 times.
  • First quarter earnings continue to exceed estimates.
  • Investors have been selling the rumor of Fed tightening all year long, so perhaps they will buy the news that it has finally started on Wednesday.
  • This idea was discussed in more depth with members of my private investing community, The Portfolio Architect. Learn More »
Fed Rate Hike Ahead Warning Sign

JimVallee/iStock via Getty Images

We finished last week in the same manner that we finished the one before, as the Dow Jones Industrials fell nearly 1,000 points on Friday, extending the losing streak for the major market averages to four weeks. The Nasdaq Composite has fallen back

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This article was written by

Lawrence Fuller profile picture

Lawrence Fuller has been managing portfolios for individual investors for 30 years, starting his career at Merrill Lynch in 1993 and working in the same capacity with several other Wall Street firms before realizing his long-term goal of complete independence when he founded Fuller Asset Management.

He is the leader of the investing group The Portfolio Architect, which focuses on an overall economic and market outlook that complements an all-weather investment strategy designed to produce consistent risk-adjusted market returns. Features include: Portfolio construction guidance, access to an “All-Weather” model portfolio and a dividend and options income portfolio, a daily brief summarizing current events, a week ahead newsletter, technical and fundamental reports, trade alerts, and 24/7 chat. Learn More.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Lawrence Fuller is the Managing Director of Fuller Asset Management, a Registered Investment Adviser. This post is for informational purposes only. There are risks involved with investing including loss of principal. Lawrence Fuller makes no explicit or implicit guarantee with respect to performance or the outcome of any investment or projections made by him or Fuller Asset Management. There is no guarantee that the goals of the strategies discussed by will be met. Information or opinions expressed may change without notice, and should not be considered recommendations to buy or sell any particular security.

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Comments (21)

Great article—-I keep hearing talk that there hasn’t been capitulation yet—many stocks in the Russell and NASDAQ 100 growth names are down between 40 to 70% —and it started in the 4th qtr of 2020–as in 16 months ago—-what the pundits were calling a rolling bull market was actually a rolling bear market that’s lasted 15 months, albeit it snowballed the last 4 months. It’s only been a handful of stocks holding up the S&P. Most 60/40 portfolios diversified by market cap/ intl have already been decimated. There’s nowhere to hide except to sell sell sell. My bonds are down between 8-11%. I keep nibbling away on both bond funds and equities. These CNBC people say we need a washout day. We’ve had many washout days. In fact I’ve had days when the S&P was strong but my portfolio was down because bonds-small caps and international were in the crapper. Today, after the margin calls from Fridays steep selloff we’re satisfied we had a slight rally—-but once again—I flashed red while CNBC flashed a sigh of relief
AuCoaster profile picture
@Sane Man
Bonds, small caps, and international are not the place to be late in the cycle.
Energy, other inputs, and large caps until the market gasps its last.
Then Treasuries until the bottom.

Of course, we have elevated inflation this time around.
An excellent well written insightful piece; well researched and articulate ; facts and charts of yesterday. I happen to be one who is presently standing beneath the wall worrying and clueless as to what the next few months bring. My gut is not in sync with facts and charts. The markets and millions of participants’ actions are discounters of future activity … out six to twelve months. Maybe more. Where there are no charts; only tea leaves. They have gone from solid green to solid yellow … to a slow blinking red.

There is a new generation of investors who have not been mauled by the bear. We have had a 13 year bull market in stocks and a 40 yer bull market in bonds. Making money has been easy. Buy the dip. Ignore valuations. It is different this time. The newbies are symbolically represented by Robinhood, whose stock has gone from $85 to $10. And maybe ARKK; not surprisingly Ms Wood has been seeing a steady inflow of new funds even though her tech disrupter strategy has been sliced and diced after a great run. Trying to catch the falling anvil is a strategy of the innocent, uninitiated and drinkers of Jim Jones Koolaide. The question is: Are we in a new global macro game changer environment? I think somewhere between maybe and yes.

There are many moving parts afoot domestically and globally that the Fed has little or no control over. Total global debt levels of $300 TRILLION in a backdrop of rising rates; and a derivatives market that allegedly exceeds $1,000 TRILLION (AKA $1 QUADRILLION or about 12x Global GDP) come to mind. There is the Ukraine War and Putin’s apparent pless than stable mindset which is a mega unknown; he and his cronies frequently mention the use of nuclear weapons, and Russian propaganda now sells the conflict as an existential one with the West where Mother Russia is the victim. Black Swans are in the air that could seriously have a negative impact on the planet as well as earnings and asset prices. A nuclear fireball is the blackest swan flying; the once unimaginable is now the imaginable. White Swans are on the endangered species list.

In an inflationary debt ridden unstable world, where the US economy is 70% consumer driven, where that consumer is experiencing inflation that far exceeds 8.5% … on top of growing social and political dysfunction … how solid is an S&P forward earnings estimate of $240? Granite … sandstone … quicksand? IMHO, one Black Swan alighting makes it quicksand. Prayer is not generally a recommended investment strategy, but I am counting on it as a supportive 300 day moving average. If not a bull, a docile calf would be better than a grizzly bear cub looking for its mother. 🙏🤞
@Lawrence Fuller yours was cerebral, mine was gut. I am pulling for yours! 🤞🙀
AuCoaster profile picture
Indeed, the risks abound, as usual.

But, the fear is very elevated at the moment, greater than usual.
This creates opportunity, and so I bought SPY calls today.

Warnings of the coming apocalypse moved me more during the 1960s and 1970s than such does today. Is it different this time? Perhaps.

The cycle continues.
Smarter article than the person saying 'things will go down, then go up".
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