Sam Ro on Market Surprises and Express-o Awards | 2022 Insights & Analysis

In episode 94 of the Investopedia Express with Caleb Silver (July 11, 2022), we explore the dynamic shifts in the U.S. economy amid recent bear markets. From the 2008 financial crisis to the pandemic's onset in 2020, the Federal Reserve's strategies have evolved—from slashing interest rates to now raising them to combat inflation, all while aiming to avoid a recession. Despite concerns, the labor market remains robust, with 372,000 jobs added in June and unemployment steady at 3.6%, supporting the Fed's aggressive rate hikes.

Although recession fears have slightly eased, the Atlanta Fed's GDPNow tracker forecasts a 1.9% GDP decline in Q2, an improvement influenced by falling oil and gas prices. Commodity prices, led by copper, continue to tumble, aligning with declining inflation expectations, which dropped to 2.5% from 3.5% earlier this year. Experts suggest we might be entering a deflationary period reminiscent of the 1940s, driven by anticipated recession impacts on demand and prices.

Meet Sam Ro

Sam Ro, CFA, editor of the TKer Substack, brings over 15 years of experience as a business news journalist. Formerly managing editor at Yahoo! Finance and deputy editor at Business Insider, Sam has also contributed as a markets correspondent and senior equity analyst for Axios and Forbes.

Episode Highlights

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Caleb and Sam discuss the ongoing market challenges and investor sentiments. Sam emphasizes that many investors seek reassurance to hold rather than sell during bear markets, highlighting historical resilience through recessions and crises. Despite market downturns, earnings expectations remain strong, with companies often beating forecasts even amidst inflation and geopolitical tensions.

They reflect on surprising market developments in early 2022, including the unexpected strength in earnings outlooks and the retreat of retail investor enthusiasm seen in muted trading volumes compared to the pandemic peak. Questionable corporate moves, like Elon Musk's Twitter bid and AMC's unexpected acquisition of a Nevada gold mine, spark lively debate.

Fast Fact

According to Citi, global earnings downgrades are increasingly outpacing upgrades. In the U.S., S&P 500 companies are projected to see a 4.3% earnings increase in Q2 2022, the slowest growth since late 2020 (FactSet).

The hosts also explore cultural phenomena impacting markets, such as the Matt Damon crypto.com Super Bowl ad signaling a crypto market peak, and the return of the E-Trade baby, a nod to the dot-com bubble era.

Best trades of the year include long positions in oil, supported by strong demand and supply constraints, while shorting cannabis stocks proved profitable amid industry struggles. The discussion extends to NFTs, where Sam criticizes art-only NFTs but praises those offering exclusive community access.

Top Money Shows and Films

Sam recommends Showtime's Billions for its intricate portrayal of financial trades, while Caleb adds favorites like Succession and Inventing Anna. For films, Sam’s top picks include Margin Call, Trading Places, The Family Man, and the Wall Street series, highlighting their insightful takes on finance and human motivations. Caleb complements with titles like The Big Short, Moneyball, and Wolf of Wall Street.

Lightning Round: Overrated or Underrated?

• Buy Now, Pay Later: Overrated
• Web 3.0: Overrated but potentially early-stage
• Esports: Underrated with exciting demographic trends
• Fintech: Underrated, especially innovations reducing payment friction
• ESG: Well-intentioned but overrated due to greenwashing concerns

Caleb closes by highlighting the importance of quality content in financial media and thanks Sam for joining the Express, encouraging listeners to follow his TKer newsletter for fresh market insights.

Term of the Week: Specific Performance Clause

This legal term is central to Elon Musk's ongoing Twitter acquisition saga. Musk alleges Twitter breached contract terms, citing bot user undercounting and business irregularities. Twitter’s board threatens legal action to enforce the deal under the specific performance clause, which could compel Musk to complete the $44 billion purchase. The clause empowers courts to mandate contract fulfillment, assuming financing is secured. The dispute has impacted Twitter’s stock price, and while an out-of-court settlement is possible, Musk appears determined to pursue his position.

Stay informed with Investopedia for updates on this and other key financial terms.

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