Welcome Investors!

Here’s your Alpha portfolio update for May 2024:

• Returns so far this year +4.7%

• Our leading stock is Turning Point Brands Inc currently at +26.7% while our position in Brunswick Corporation lagged by -7% and is now out from this month’s portfolio.

• We have 9 new stock positions and 5 stocks sold.

• Total positions: 21
  _{See the investment portfolio for the rest of our positions.}

Remember way back when (last month, to be exact) I mentioned that April is — statistically — the best month of the year on average for S&P 500 returns?

Well, not this time.

Stocks are headed for their first losing month since October. The 30-stock Dow Jones Industrial Average is on pace for a more than 5% loss in April. The S&P 500 and Nasdaq Composite are headed for declines of more than 4% each.

What happened?

Our “best month of the year” was hit with a one-two punch.

Inflation data in the first half of the month, including the anxiety-inducing Consumer Price Index (CPI), came in hotter than expected, showing inflation to be a stickier problem and dashing hopes of a predicted Fed rate cut as early as June.

Even as that number was tempered a bit, later in the month, by the personal consumption expenditures price index (CPE — the Fed’s preferred inflation metric) hitting closer to the target, the message was clear: persistent inflation raised the likelihood the Fed would stay higher for longer.

In fact, markets are now pricing in just one quarter percentage point cut in 2024, down from the six or seven anticipated coming into the new year.

Equities fell and bond yields rose in response to the reduced rate cut outlook.

Adding to investor worries, tensions in the Middle East escalated dramatically with the first direct strikes between Israel and Iran. Diplomacy and cooler heads appear to have stopped the tit-for-tat, at least for now. But the spectre of an all-out war now hangs over the region.

Opinions: Down, Flat, Up

Jim Lebenthal of Cerity Partners, a fellow notable in his ability to find blue sky in the most turbulent markets, predicts the S&P 500 will close out the year at 5,200 – only slightly up from where it is today, at roughly 5,060 – with a lot of chop between now and then.

Fundstrat’s Tom Lee believes April was a temporary moment of pain. “I think there is upside to earnings, I think multiples can expand. I know this is going to be tough for investors to embrace, but I think something like 5,600-5,700 is probably where the S&P exits the year.”

And For What It’s Worth…

In a microcosmic example of the sticky inflation gripping the economy, grocery chain Trader Joe’s recently increased the price of their fan-favourite bananas from $0.19 to $0.23 – per banana — much to the chagrin of its intense fanbase of customers. OK, some didn’t care. But others flooded social media with messages like “End of an era” and “Bananagate” and sad, angry, and exploding head emojis.

The 4-cent price hike comes after 23 years of stable pricing for the fruit that recently made the Trader Joe’s Product Hall of Fame.

As a side note, bananas occupy a particular niche in the lore of Trader Joe’s company history.

Dan Bane, the former CEO, said the stores used to sell bananas by the pound, which is typical, but because the stores didn’t have scales, they were weighed and packaged at its warehouse.

That changed after a conversation with a “nice little lady” customer at a Sun City, Arizona, store. The woman had looked through the banana display, but moved on.

Bane approached her and politely inquired why she opted not to put any bananas in her cart. “And she says to me, ‘Sonny, I may not live to that fourth banana’’ said Bane. “And so we decided the next day that we were going to sell bananas individually.”

And with that… Have a great week!