Ouch…

Morning Traders! We are Munny Tree. From market dips to healthcare flips, we're here to keep your portfolio healthy and growing.

This is the last week of May and we need it to be a good one because last week wasn’t pretty for us:

• PCE comes on Friday

• Healthcare is having a moment

• What we are watching for in the market this week

Last Week’s Performance

Last week was the worst week in our portfolios 2 years 😭.

We lost 5.56% during last week 📉. It’s unusual because the S&P was flat and NASDAQ was up 1%+ for the week. Our portfolio has a beta of 1.05 which means we should track the market fairly closely. And that….didn’t happen last week.

We are now down -2.1% for the month. Yet we are still up 3.3% for the quarter and 23%+ for the year. We expect some rebound this week.

Our current holdings:

PCE Data on Friday

We end the month with a bang! Get ready for some market drama as the PCE index takes center stage. Think of the PCE as the Federal Reserve's crystal ball for inflation, giving them (and us) insights into consumer spending and price trends. If the PCE comes in hot, it might spook the markets that “higher for longer” is never going away, or worse, fears of more rate hikes, sending us on another rollercoaster ride. But if it cools off, we could see a sigh of relief and a nice market rally which should give June a boost to end the quarter. With last week's market hiccups still fresh, this report might just be the plot twist we need to keep this engine humming.

So what are we expecting from PCE? Markets are expecting:

• Monthly PCE to remain the same as the previous month at 0.3% or ~2.7% annual rate.

• Core PCE is expected to actually fall to 0.2% vs 0.3% last month.

Core PCE is the risk for this report. If Core doesn’t fall we might see the markets freak out because of it. Right now markets are still pricing in rate cuts this year and any data that puts that at risk will be bad for markets.

Health Tech is having a moment

Our screening looks through 90 companies in the “Health Technology” sector. We have a number of screening criteria and most of these companies get eliminated from our weekly watch list for one reason or another. But these companies are almost never eliminated because of Analyst Rating (one of our screening criteria - a stock must have a ‘Buy’ or better rating). Of the 90 Health Tech stock we screen, 81 of them have a ‘Buy’ or ‘Strong Buy’ rating by analysts. Pretty remarkable.

So what’s going on here? Why is everyone so in love with Health Tech, especially considering that it’s lagging behind the broader market this year in terms of stock performance?

1. Healthcare is the largest sector in the US economy at $4.5 Trillion in annual spending.

2. It’s also the most heavily regulated part of our economy. If you’ve ever used the American Healthcare system then you know that there is a lot of room for operational and technological disruption.

3. Healthcare and Pharmaceuticals are becoming more and more specialized and specific to very narrow target markets.

All of this creates a massive amount of opportunity. There are now hundreds of companies entering the space and legacy blue chip companies are investing heavily in new offerings. The growth potential is massive. This is what these analysts are seeing and why price targets for the Health Tech sector are well above average.

Don’t expect this to change anytime soon. Healthcare is like a giant cruise liner. Once it’s going in a direction it’s difficult to get it turned around. 🛳️

What we are watching this week

Managing Existing Portfolio:

• C3 AI (ticker: AI): Reports earnings on Wednesday after the bell. We will sell this position before the close on Wednesday

• 10X Genomics (ticker: TXG): Currently down 14.7%. We will be looking to trim this position unless we see a dramatic reversal.

• Mobileye Global (ticker: MBLY): Had a slight recovery last week that was dashed on Friday when it fell 9%. Still unsure why it fell so much on Friday. No major announcements or anything. Analysts still have it as a ‘Buy’ or ‘Strong Buy’ and it’s 1 year price target is 50% higher than its current price. Many things align to say this stock should be doing better than it is. But….if it doesn’t start recovering we will sell and cut our losses.

Watch List for this week (in order of most likely to buy):

We expect to add new positions this week as we look to close others. Look out for trading alerts that will be coming!

Happy Trading!

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.