CHRIS VERSACE: Good morning, Action Alerts Plus members. It's Thursday, October 20th. As the bear market rally continues, we're finding ourselves in a bit of a no man's land with the market. And we're waiting clarity on several potential catalysts that could shape not only how we end the week, but how the next few weeks pan out for the market.
First among those is the current earnings season. As we shared in our morning notes, while the current earnings season started off on solid footing, as we move past banks and financials, a greater array of companies and sectors are reporting. And what we're seeing are not only mixed results, but more companies issuing weaker than expected guidance and cautionary comments as well. Case in point, this morning Dow came out and said high energy and feedstock costs are driving record inflation and impacting demand in the eurozone.
Former AAP holding Nucor said it sees an increasingly challenging market condition amid economic uncertainty. In addition to those comments, others are announcing cost cutting measures and layoffs. Now, these are the drivers behind some of the moves that we've made in the portfolio as we've been looking forward over the last several weeks and candidly, even a little bit longer than that, given concerns about the impact of the dollar, the impact of persistent inflation, and when that might mean the Fed has to do, and other things that we've been talking about that are cumulative headwinds for the market.
Now, we've got several thousand companies yet to report. And odds are we'll continue to hear more about these sobering comments in the coming weeks. Again, we've shared our concerns over these factors with members as we've shifted the portfolio to a more defensive stance with companies that have more inelastic business models, ones that have far greater visibility-- case in point Lockheed Martin and Elevance-- but also ones that are positioned to benefit from spending out of the White House, such as ChargePoint, Vulcan Materials, United Rentals, as well as others that are poised to benefit from what we would say are persistent pain points-- case in point AMN Healthcare.
As the earnings season unfolds, however, inflation continues to be persistent. We've shared the Fed will need to go bigger for longer. And here too the market finally seems to be catching up to our thinking, especially as the recent parade of Fed heads is starting to signal that even at the December monetary policy meeting, the Fed could go bigger than previously expected. What are we seeing here now? What does this all mean?
Well, it likely means that the Fed fund futures could be around 5% by the time the Fed completes its monetary policy meeting in February. Let's think about that for a second. As rates go significantly higher from where they are, it means higher borrowing costs for businesses and consumers, slower spending, and EPS pressure ahead. Now, we've got two more Fed speakers making the rounds today. And that means we're going to continue to watch the two-year Treasury, the yield on which hit 4.6% earlier today, the highest in something like 15 years.
Now, members, especially those who have been reading our notes, watching The Daily Rundown, and listening to the AAP podcasts, know we've been calling for this latest round of expectation resetting, both for earnings as well as the sobering wake up to what the Fed will need to do to fight inflation and its impact on the speed of the economy. Members, you're probably tired of hearing me say this. But we will continue to be cautious with the portfolio, looking for the right opportunities to put capital to work in our current shopping list.
And as we look forward, in addition to digesting those earnings and the latest economic data, we're going to continue to be carefully watching the inflation data in particular. Remember, this is the data that is spurring the Fed to do more, go bigger for longer as we like to say. But we always want to be on the lookout for changes in the data. Should we see a more pronounced decline in the inflation data, that could lead us to change what we're thinking for the market. However, based on the data that we've seen thus far, that doesn't seem like it's going to be likely. Well, that's today's rundown. Thanks for joining us. We'll be back with another edition tomorrow.