The misses keep coming:  

AGNC, AMKR, CRK, CACC, PLOW, FMC, FWRD, HLIT, IRT, KMPR, LSCC, LEG, PHC, PSMT, THC, RIG, VFC, VRNS and WK all missed or guided down last night. That’s 19 out of 50 reports – just under 40%.  This morning, so far, we have misses or guide-downs from ALLE, AMGN, ARES, TECH, BP, CGNX, DORM, EPD, GPK, HRMY, HAYW, INCY, JBLU, LDOS, MPLX, NBIX, PFE, and ST – which is 18 out of 48 (37.5%).  These are not great results…

AGNC is down because the company experienced a significant widening of the mortgage spread during the quarter, which negatively impacted the Net Interest Income as well as their book value – which is what we discussed in depth in “Faltering Thursday – “Our Deposit Beta Is 10 Times Higher Than Last Year” back on the 19th – as a major problem that would be facing the Financials this quarter.

ALLE, ARES, BP, CACC, DORM, EPD, FWRD, GPK, HAYW, HRMY, IRT, KIMPR, LET, PSMT, RIG, TECH, VFC, VRNS and WK are all being hit by rate hikes as they may not all be financials but they offer Financial Services to their customers.  HAYW is a pool company that provides financing, for example BP borrows heavily in trading and hedging supplies, etc… 

You have to really think about your businesses to build safety into your portfolio in this market! Other than improving our existing positions, we have not done a lot of buying this earnings season as we’ve been waiting to see what the Fed has to say tomorrow. If they don’t raise rates at tomorrow’s meeting, after last month’s blazing hot Jobs Report and last week’s blazing hot 4.9% GDP – then the hiking may be over for good.

If, on the other hand, the Fed does raise rates tomorrow, then they are serious about getting inflation down and these companies and many, many others are in for a World of Pain!  

This being Halloween, let’s take a look at what investors should be scared of as we come into the end of the year:


The retail industry is among the most vulnerable, especially given the current economic conditions. With inflation still on the rise and consumer spending becoming more cautious, retailers are feeling the pinch into the holidays. 


The construction sector is another one to watch out for. Typically, construction takes a hit during economic downturns due to reduced investment in infrastructure and real estate and higher for longer rates are not helping at all. China is already terrifying and Europe is beginning to catch up. 

Arts and Entertainment

The arts and entertainment sector is particularly vulnerable as discretionary spending is one of the first areas to be cut when the economy takes a downturn.

Financial Sector

Given the ongoing financial turmoil and high inflation, the financial sector is also at risk. This is compounded by geopolitical factors like Russia’s invasion of Ukraine and the trouble in Israel, as mentioned in the IMF’s World Economic Outlook.

Consumer Demand & Mortgage Lending

With tighter monetary policy, higher mortgage lending rates are weighing on consumer demand, as noted in the UN’s World Economic Situation and Prospects report.

Given the Fed’s upcoming decision on rate hikes, these sectors could face even more challenges. It’s a spooky time for investors, and caution is the name of the game for now. Fortunately, last year, we build our Watch List using companies that had low debt, high profits per employee (to avoid labor costs being a major factor) and proven resilience during Covid – along with, of course, a positive general outlook.  

Happy Halloween, 

    • Phil


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