Monday, March 8, 2021

Morning Note: Arresting the Flow

Hedge fund manager David Tepper, in a CNBC interview this morning, rescued the market from a notably, and surprisingly (given the weekend stimulus news), down open.

The headline flashed that the oft-prescient Tepper sees rates settling down and stocks doing well going forward -- futures instantly changed direction. As I type the S&P 500 is green, the tech-heavy Nasdaq 100, however, is still a bit red.

The Senate approved $1.9 trillion of fresh new "stimulus" over the weekend, which makes the rest (a little reconciling between the House and Senate versions, then off to the President to sign) academic.

So, yes -- given the yet more juice heading the market's way -- Tepper's optimism makes perfect near-term sense. Which makes this morning's tepidness in markets a bit surprising. But, then again, like I said Friday, the economy's looking up, and stocks have definitely not reached these levels on positive, or the prospects for positive, economics.

Here's a snip:

"Yes, the economy is absolutely finding its legs -- yeah, I could quip prosthetics right here, but I won't. I.e., the surface fundamentals are clearly improving, but, alas, the fundamentals are not remotely what stocks are trading on these days. As strong fundamentals mean (or should mean) less stimulus, and (do mean) higher interest rates and a stronger dollar."

I'm not saying that traders can't/won't change their thinking and begin trading on improving fundamentals, it's just that with them -- given the present macro setup -- comes rising inflation (transient or otherwise), higher interest rates, a potentially stronger dollar, and so on (possibly higher taxes even, ultimately). 

So, sure, we'll continue to own stocks, but we'll diversify into the stuff levered toward the areas the powers-that-be will have to intervene in (rates and the dollar) should present trends continue, as well as where we know they'll be spending the next few trillion of stimulus (infrastructure) coming our way in the not too distant future. 

Asian equities had a miserable session overnight, with all but 3 of the 16 markets we track closing notably in the red. China, in particular, got hammered.

Europe, on the other hand, is having a nice go of it so far this morning, with all but 2 of the 19 bourses we follow in the green.

U.S. major averages are mixed, but leaning green: Dow up 189 points (0.58%), SP500 up 0.13%, SP500 Equal Weight up 0.61%, Nasdaq 100 down 0.74%, Russell 2000 up 1.26%.

The VIX (SP500 implied volatility) is up 5.07%. VXN (Nasdaq 100 i.v.) is up 7.84%. 

Oil futures are down 0.91%, gold's down 0.54%, silver's up 0.26%, copper futures are down 0.45% and the ag complex is down 0.55%.

The 10-year treasury is down (yield up) and the dollar is up 0.24%.

Our core portfolio's leaders to start the session are banks, MP (rare earth minerals), materials, industrials and utilities. Our worst laggards being emerging market equities, solar, oil services, Asia-Pac and energy. All in, we're off 0.27% as I type.

Think about those "powers-that-be", desperate to keep virtually everything elevated -- to, in essence, halt the natural rhythm of the business cycle -- as you take in the wisdom of Alan Watts:     emphasis mine...

"...the greater part of human activity is designed to make permanent those experiences and joys which are only lovable because they are changing. Music is a delight because of its rhythm and flow. Yet the moment you arrest the flow and prolong a note or chord beyond its time, the rhythm is destroyed."
"To resist change, to try to cling to life, is therefore like holding your breath: if you persist you kill yourself."

Have a nice day!

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