As a former competitive swimmer, I can definitely say I preferred swimming in a calm pool rather than a choppy sea, which parallels investing. Most of us would prefer a relatively calm market to the choppiness that we have seen with the S&P 500 (SPY) over the past couple of weeks. But we deal with the cards that are dealt to us. We continue to see volatility in the markets as last week started the same as the previous week, with three straight days of losses, only to rebound on Thursday. Value investors continue to worry about the Fed increasing rates, while growth investors fear inflation and an increase in bond yields. The key to investing in volatile periods is to stay the course and not panic. So, in today's commentary, I will highlight the market over the past week and what I expect this week. Read on below to find out more…

(Please enjoy this updated version of my weekly commentary from the POWR Value newsletter).

Stocks finished lower on Monday, as inflationary concerns remained on investors' minds. The Nasdaq Composite lost 0.4% after the benchmark finished its fourth straight weekly drop in the previous week, its longest losing streak since August 2019.

The market ended lower again on Tuesday as investors weighed solid retail earnings against disappointing housing data. Housing starts declined a worse-than-expected 9.5% in April due to increasing materials costs and supply chain issues.

For the third day in a row last week, stocks finished lower on chopping trading on Wednesday. The big story of the day was the release of the Federal Reserve's meeting minutes. Of concern to investors was that several policymakers indicated that the Fed might need to taper asset purchases at some point.

The market rebounded on Thursday as a better-than-expected update on the U.S. labor market lifted investor sentiment. Initial jobless claims came in at 444,000 in the week ending May 15th, which marked a fresh pandemic low and additional proof that the recovery is coming along. All three major indexes snapped a three-day losing streak.

Stocks were mixed on Friday, as the Dow rose 123 points, while both the S&P 500 and Nasdaq closed lower with investors wanting more clarity from the Fed. This week started today on a positive note, with the tech-dominated Nasdaq leading the way.

Investors are pleased to see a downtrend in domestic COVID-19 cases, with U.S. infections falling to their lowest point since June.

 Market Outlook

While most investors fear inflation and a resulting increase in rates from the Fed, I don't believe anything significant will change in the near term to lead us to make any changes to our portfolio.

I believe the growth story in the economy continues to look great. The economic recovery is moving along and is starting to expand into Europe, where vaccinations are leading to an opening of the economy.

While the Fed may look to taper purchases at some point, I still believe monetary policy will remain accommodative. What does this mean for us?

Well, not only are we in great individual value stocks, but I believe value, in general, should continue to look strong with more room for growth in cyclical companies as the economy continues its recovery. This means we are in a great position to benefit from that continued recovery.

Even as the week started on a positive note, we can still expect pockets of volatility in the markets as investors remain concerned over inflation. The Fed believes inflation is temporary, and I will continue to monitor the situation as the Bureau of Economic Analysis will announce the April personal consumption expenditures price index at the end of the week.

What To Do Next?

The POWR Value portfolio was launched in early May and is off to a fantastic start.

What is the secret to success?

The portfolio gets most of its fresh picks from the Top 10 Value Stock strategy which has stellar +38.63% annual returns.

If you would like to see the current portfolio of value stocks, including the 3 brand new picks we added on Friday, then consider starting a 30 day trial by clicking the link below.

About POWR Value newsletter & 30 Day Trial

All the Best!

David Cohne
Chief Value Strategist, StockNews
Editor, POWR Value Newsletter

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SPY shares were trading at $419.04 per share on Tuesday afternoon, down $0.13 (-0.03%). Year-to-date, SPY has gained 12.45%, versus a % rise in the benchmark S&P 500 index during the same period.

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About the Author: David Cohne

David Cohne has 20 years of experience as an investment analyst and writer. He is the Chief Value Strategist for StockNews.com and the editor of POWR Value newsletter. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers.

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