Sunday, January 20, 2019

CAREFUL WHAT YOU WISH FOR!

As the presently hot topic of trade rears its head during virtually all of our client revue meetings of late, it becomes abundantly clear to me that many, if not most, folks sympathize with the narrative that the U.S. has been taken advantage of for years by its trading partners, the focus of late being on China.

Saturday, January 19, 2019

This Week's Message: Enjoy Your Coffee, But Don't Let It Sway You!

The reality that markets are mere reflections of human action has been a growing theme herein of late. And while that's easy to get, and should go without saying, it is the most important distinction that I hold firmly in mind as I go through my daily and weekly exercises in pursuit of the knowledge of the state of general conditions.

Thursday, January 17, 2019

Charts of the Day: Unequivocally Bullish Action

In a Tuesday blog post I offered up the following:
While the trading off of the December 24th low has indeed been bullish (late intraday buying, rallying amid bad news, strong breadth, etc.), I want our clients to understand (if not expect) that a testing of that Christmas Eve low remains a distinct possibility. Although, again, the action of late has been encouraging...
Should the bulls succeed 2600, 2630 (where the next resistance line meets the 50-day moving average [green line]) will be the next big test.

2018 Year-End Letter, Conclusion

Link to Part 1  (What Makes Us Tick)
Link to Part 2  (General Conditions)
Link to Part 3, Sectors  (Steep Corrections During Expansions)
Link to Part 3, Sectors  (Financials and Industrials)
Link to Part 3, Sectors  (Technology)
Link to Part 3, Sectors  (Materials and Energy)
Link to Part 3, Sectors  (Cons. Discretionary & Comm. Svrcs.)
Link to Part 3, Sectors  (Healthcare and Cons. Staples)
Link to Part 3, Sectors  (Utilities and REITs)
Link to Part  (Bonds and Gold)
Link to Part 5  (The Dollar)
Link to Part  (Global Investing)

In our 2018 year-end message we've presented what we believe to be the characteristics of good portfolio managers. We've expressed the sense of security we gain in the understanding that while not all good investments make money, if we strive to make only good investments the odds are strongly in our clients' favor over the long-term. We highlighted the whys and wherefores of our present sector and regional weightings. We shared our views on the importance of maintaining a global investment mindset and we expounded on why we think that many currency traders once again may be on the wrong side of the dollar going into 2019.

Wednesday, January 16, 2019

U.S. Housing Not So Bad

Whether we're talking the stock market or economic indicators, we are forever looking at how prices/activity responds to the overall character of the news related to a given market or to a given segment of the economy.

Quote of the Day: The ECB "has the [Eurozone] market's back"

In our 2018 year-end letter's section on the dollar I pointed to low expectations for the Eurozone economy leading to a softer European Central Bank, and how that, along with low relative valuations for Eurozone equities and our view that recession risk for now remains low, makes for a bullish setup for the region's stocks, as well a bearish one for the U.S. dollar (a bullish scenario for equities the world over).

Tuesday, January 15, 2019

Chart of the Day: Don't Break Out Your Rally Hat Just Yet!

As I illustrated for you over the weekend, 2600 on the S&P 500 stands to be a tough technical level to beat in the near-term.

2018 Year-End Letter, Part 6: Global Investing

Other than updating the accompanying charts, and my closing comments, there's really no improving on our 2017 letter's section on global investing. Ironically, as I type here today, Brexit remains an issue (mentioned in the 2016 must watch video), and while Italian banks aren't as forefront as they were then, the new populist Italian regime definitely is (although they did finally come to terms with the EU recently on what initially was an utterly ridiculous budget proposal).

If there's been a common theme over all the years we've been blogging, and, for that matter, managing money, it's that the world is a very big place, and the U.S., in terms of its share of the world's human capital, is a very small place. While we can debate the causes of the miracle that makes the home of a mere 4% of the world's population the far and away world's largest economy, we can't deny the fact that the human race is becoming more connected by the minute and, thus, the nations and institutions that embrace the interdependence that this global connectivity breeds -- while successfully navigating the at times turbulent geopolitical waters -- will prosper the most in the decades to come.

Headline of the Day

If you're wondering what happened to this morning's strong rally in the Dow (up triple-digits to down single-digits), here's your answer:

Monday, January 14, 2019

Quote of the Day: Hard Brexit Bad For The Economy, And, Thus, The Politicians...

In "The Dollar" section of our 2018 year-end letter, one of the bullet points on why I anticipate a downward bias for the greenback was the economic, and, thus, the political risk inherent in a hard Brexit. The following from Bloomberg's Markets Live Blog this evening speaks to that point:

Sunday, January 13, 2019

2018 Year-End Letter, Part 5: The Dollar

In the dollar section of our 2017 year-end letter we made our contrarian (currency traders were betting the dollar would fall) case that the dollar was likely to trend higher throughout 2018. Here's our final paragraph where we acknowledge the difficulty in predicting and the would-be benefit if we happened to have been wrong:

Saturday, January 12, 2019

A Tough Test for the Recent Rally is Imminent (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Friday, January 11, 2019

Quote of the Day: Morgan Stanley Sees A 'W' Coming...

Last Thursday I pointed to strong historical evidence that the deep correction low reached on Christmas Eve will ultimately be tested, creating your typical W pattern, as opposed the V pattern that's developed thus far. Morgan Stanley's chief strategist Mike Wilson, per below, thinks it's virtually assured. 

This Week's Message: Realistically Optimistic, For Now...

Your preconceptions, if not your predisposition, could have you judging the graph below in either a positive or a negative light.

Here's our money market fund assets chart since the last recession:

Thursday, January 10, 2019

2018 Year-End Letter, Part 4: Bonds and Gold

Bonds:

We'll limit our narrative on bonds to the investment grade space (high quality corporates and treasuries) and keep it short and sweet.

Wednesday, January 9, 2019

It's Very Windy Out There!

Apple just cut its iPhone production by another 10% and the World Bank just lowered its global growth forecast for 2019, and the stock market just posted its 8th up day out of the last 10.

Charts of the Day: It's All About Trade, At the Moment

Traders came into the morning expecting a strongly positive statement from the U.S. team after concluding 3 days of talks with China's trade negotiators.

Tuesday, January 8, 2019

The Shorts Are Back, In Force...

On occasion herein I'll make reference to "short interest" or to the "shorts" when referring to traders who are betting that the market (or a given stock, commodity, etc.) is about to fall. Shorting is the act of selling borrowed shares with the expectation that they'll be returned to the lender after the borrower repurchases them at a much lower price; the difference being pocketed by the borrower.

Jittery

To give you a feel for how sensitive the stock market is to the trade negotiations with China, here's the Dow this morning:




Monday, January 7, 2019

2018 Year-End Letter, Part 3: Sectors: Utilities and REITs

Utilities:

We stuck with our zero target to utilities throughout 2018, despite the end of year economic uncertainty that saw the sector slip into the green with a 1.4% gain on the year. While a 1.4% gain sounds like nothing to write home about, it did land the sector in 2nd place on the year, behind healthcare (+3.4%).

Data of the Day: The Economy's Doing Okay

The Institute for Supply Management's December services sector survey says the economy is still expanding, although at a slower pace of late. December's score of 57.6 represents a sharp decline off of November's 60.7.

Sunday, January 6, 2019

2018 Year-End Letter, Part 3: Sectors: Healthcare and Consumer Staples

Healthcare:

In last year's letter we expressed our view that, given our assessment of general conditions at the time, the healthcare sector -- with its defensive nature -- was likely to under-perform the more cyclical sectors in 2018. Although we nonetheless felt that the sector held sufficient prospects to justify a high single-digit weighting.

Saturday, January 5, 2019

This Week's Message: The Intraday And The Big Picture (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust: 

Friday, January 4, 2019

2018 Year-End Letter, Part 3: Sectors: Consumer Discretionary and Communication Services

Consumer Discretionary:

Take a look at the top 10 names in our core consumer discretionary sector ETF:

Amazon
Home Depot
McDonald's
NIKE
Booking Holdings
Starbucks
Lowe's
TJX
General Motors
Target

2018 Year-End Letter, Part 3: Sectors: Materials and Energy

Materials:

I could essentially copy and paste our outlook for the industrials sector and insert materials. Recall that I cited materials as vying for the top spot with industrials as 2018's most frustrating sector.

In a nutshell: Materials still warrant a 15% target weighting in our view; based on generally decent (still) macro conditions, the prospects for a sizable infrastructure spending bill in the U.S. sometime in 2019 (yes, this one has bipartisan support), and, contrary to our view coming into last year, the prospects for an on balance weakening U.S. dollar during the course of 2019.

So Now The Traders Step In

This morning we're seeing a nice extension of a rally that was initially sparked by positive trade news and better than expected data out of China. The gains have extended on Fed Chair Powell masterfully -- and justifiably -- walking back his recent commentary that sparked a deep selloff.

Thoughts on Powell: The Euphoria and the Risk

Logging my thoughts as I listen to Powell this morning:

Listening to Fed Chair Powell as I type. His commentary was everything the market could ask for. In the followup interview, the interviewer just posed the question that killed the market at the recent press conference (on the balance sheet). Powell is struggling with it, but he's stopping short of using the "autopilot" term that was so destructive a few weeks ago. 

That line of questioning is over now and he didn't crash the plane, so to speak.

On this morning's jobs number, and what the market is really rallying on ahead of Powell's comments...

My initial thought when I saw this morning's blowout jobs number (312k vs 176k expected) was, frankly, not positive with regard to the stock market. My thought being that it was too good, given that the market is currently begging for the Fed to back off. A crazy strong labor market, with, by the way, wages rising at the fastest clip in 10 years (read inflation), is exactly what the Fed's talking about when they talk about raising interest rates next year. Fed Chairman Powell's commentary this morning (7:30 pt) could be hugely consequential to the short-term direction of the market. 

Thursday, January 3, 2019

Today's Action

A lot to unpack in today's session. I pretty much cover the long and the short of it in the following bullet points:

Could Be Another "W" (or of course worse) Before It's All Said And Done...

The last 5 trading days have seen a very nice bounce in stocks, and you could make a case for its legitimacy based on the prospects for Fed Chairman Powell to make up for his recent press conference as he meets with previous Fed heads tomorrow; the data of late would justify a softer tone, which, depending on how it's delivered, could go a long ways toward delivering the market from its recent woes. Plus, virtually all of the latest tough news has been to some degree, and deservedly, tied to the present uncertainty over U.S./China trade relations. Clearly, odds favor a solution in the not-too-distant future.

A Real Test of Recent Late-Day Sentiment! And Remember What I Said Monday...

There's this old Wall Street adage: "the amateurs trade the open, the pros trade the close."

Wednesday, January 2, 2019

Bonus Quote of the Day

Yep (per my speculation in an earlier post), looks like the copper, and the Australian stock, rally this evening has to do with new stimulus in China:

2018 Year-End Letter, Part 3: Sectors: Technology

I began making the case early in the year that tech is, generally, in a compromised place relative to the other cyclical sectors; industrials and materials in particular.

Quotes of the Day

The following from Bloomberg Markets on the Australian dollar this evening speaks to what's presently impacting sentiment and ailing global markets:  emphasis mine...

Headline of the Day

While we can debate whether December's action was a "stock market glitch", the second part of the President's statement makes perfect sense to me:

Brief Note on This Morning's Action

Equity futures trading early last evening -- strongly in the green -- made sense to me; as the four last trading days saw buying surges at the close (with 3 of the 4 closing at the highs of the day), denoting a bullish turn in trader sentiment. I.e., you don't stay long overnight if you're not anticipating a generally positive shift in market sentiment.

Tuesday, January 1, 2019

2018 Year-End Letter, Part 3: Sectors: Financials and Industrials

In the following we highlight what we view to be the key fundamental considerations for the financials and industrials sectors (U.S.) going forward: