CHRIS VERSACE: Good morning, Action Alerts Plus members, let's start with a look at the markets now that we've heard from the latest round of Fed speakers this week following last week's horde of them. What we heard is that while some at the Fed are poised to be more data dependent, and some are eyeing a pause at the June meeting, there is a more hawkish contingent, including St Louis Fed President Bullard, that may be pushing for one, maybe two more rate hikes in the back half of the year. Now part of this reflects comments that the incremental credit tightening post recent bank failures may not have been as much as was expected several weeks ago.
Now, for those of us that track the data, it means that today's flash May PMI report and the core PCE price index data for April out later this week will be very important. If we don't see much progress on the inflation front from either one or both of those reports, we are likely to see the market further shift around its thinking from rate cuts in the second half of this year to higher rates for longer. Now, once we have the flash PMI data in hand, we'll have an alert breaking it all down for you in your email. And of course, given what we've heard from recent Fed heads, we'll be watching for any shift in tone from another Fed speaker on tap today, and of course, any comments by Fed Chair Powell when he speaks at a luncheon in DC later today.
Now all this talk about the Fed, of course, comes as the debt ceiling talks continue. As we heard last night, no deal, but progress. Now you know that we've expected an 11th hour deal, so we're not surprised at all by this dragging out. We don't like it, but candidly, we again, are not surprised.
The bigger issue to us is that while we are likely to get a deal, it is not likely to be the deal that would have some real teeth and duration to it. Remember, we have an election season upon us, and both sides on the aisle will want to claim wins in any deal that we do get. So yes, the details will matter, as will the timing, for when we may next hit the debt ceiling. My one hope in all of this is that we do get a workable deal, but it also means that we don't have to go through debt ceiling negotiations again during the height of the upcoming presidential election season.
From a portfolio perspective, well, what does this all mean? It means that we're going to continue to focus on risk management. And that means, at least in the near term, continuing to keep our inverse ETFs in play. But it also means that we're going to let our shares of SIBO run. Yes, they are bumping up against our price target. But given the incremental market volatility and concern about the debt ceiling, we are likely to see some leaded umph, if you will, in options trading. So we're going to continue to hang on to those SIBO shares at least for a little while longer.
Now let's wrap with a deeper look at yesterday's action in the portfolio. If you missed the alert, we trimmed our shares in Alphabet and Chipotle and redeployed some of those proceeds given recent weakness into the shares of both Deere and Axon. Now, as we're prone to do, we will take some chips off the table with a position if it has significantly outperformed both in absolute dollar terms and relative to the market. And that's exactly what we saw in the shares of both Chipotle and Google-- up 50% and more than 40% year to date.
Now, at the same time, with the market in a trading range we want to pick up shares of positions towards the lower end of their trading range when the risk to reward trade off is skewed in a far more favorable stance for us in the portfolio. This is what led us to add Deere and Axon shares yesterday. Now, in last Friday's roundup, we let you know that both Axon and Deere shares were on our shopping list. And given the continued strength in their business and prospects for margin improvement in the coming quarters, we opted to make these trades yesterday. The why here is that, generally speaking, rising revenue and margin improvement drives earnings. And rising earnings gives way to multiple expansion. We see that unfolding for both Deere and Axon shares, hence our latest buys for both, yesterday.
That'll do it for today's rundown JD and I will be back tomorrow to answer some more of your biggest questions of the week. Thanks for watching, and have a great day.