Morning Note: The Correct View of the World

US equity index futures left rally mode overnight to come into today's session slightly red. The overnight data and related news was all over the place.

Morning Note: U.S. Seeing Hotter Inflation... Hmm....

Despite the present tumults of Afghanistan, Ida and Delta, markets are relatively quiet to start the week. 

Macro Update: "Narrow" and "Transitory" Inflation Fantasy (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Morning Note: "A Man Hears What He Wants to Hear and Disregards the Rest" -- And a little music 😎

Traders were sanguine this morning ahead of Fed head Powell's speech due to start at 10am ET. Which is interesting since, without exception, the five Fed members (only one a voting member) who've granted interviews yesterday and today said they're ready to begin cutting monthly bond purchases much sooner than later.

Morning Note: Taper Talk Tomorrow -- And -- A Key To 'Long-Term' Investment Success

Tomorrow is setting up to be an interesting day for markets. Fed Chair J. Powell gives his keynote speech in Jackson Hole; a speech that was, at one point, clearly meant to confirm that indeed taper (cutting a bit back on monthly bond purchase) was coming, and to offer up the timeline. 

Thing is, during the time between the recent lining up of Fed board members to each give their public nods to taper and today, the delta variant has reared its very ugly head -- seeding doubt around Powell sounding the alarm come tomorrow. 

This Week's Message: Why European Equities -- And -- Highlights From a Week's Worth of Messaging

In last week's macro video I featured a clip of an interview where an analyst made a case for European stocks that comports with our own long-term thesis. I also reiterated that much of the rest of the outside world's equity markets offer a unique relative (to the U.S.) value proposition as well.

Morning Note: It (the setup) Is Way Different This Time!

I'll cut quickly to the chase this morning after a few quotes from my own morning reads (although don't skip this one, the book quote at the bottom's a good one). A more substantial weekly message will follow later today.

Morning Note: Optimism and Inflation Remain -- And -- At the Mercy of Expert Test-Takers (and Mess-Makers!)

We'll devote this morning's message to yesterday's release of IHS Markit's August U.S. Flash (preliminary) Manufacturing and Services Purchasing Managers Indices (PMI). They say a ton about current conditions.

Morning Note: Markets are Snapping Back, but why? -- And -- Happy People Spend Money

Weekend news says Korean exports for the first 20 days of August surprised to the upside, and Japan's and Australia's latest manufacturing PMI surveys held up fine. Their respective services PMI surveys, however, contracted notably (covid fears and restrictions). Eurozone services PMI's held up much better (higher vaccine rates and notably fewer restrictions, if any), while manufacturing PMIs continue to denote a mix of optimism, supply constraints and inflation.

Rough Week, Concentrated Tech, EM (etc.) Prospects (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Macro Update: Big Drop in Our Conditions Index -- And -- The Bullish Long-Term Case for European Equities (video)

Early in the video, where I show the history of our index against the S&P 500, I remind the viewer of what I was anticipating back in the day -- that when our index turns red and we turn cautious, in all likelihood the market will rally a bit further. 

I forgot to explain why that might occur: It's simply because the very same data that would have us cautious would spook policymakers into taking measures that would likely boost equity markets in an attempt to inspire the sort of reflexivity that they'd hope would avert an impending economic slowdown. 

Attention First-Time Homebuyers: Careful What You Wish For!

Rick Palacios Jr., director of research for John Burns Real Estate Consulting just posted a most-telling thread on the current state of the residential real estate market (see below). 

Morning Note: "Average" Stock Correcting Hugely -- And -- Patience is Key!

Yesterday, I touched on the resoundingly negative breadth that conflicted with positive moves in the major averages. While this morning's breadth is a touch more tolerable, it's still nothing to write home about.

Breadth Doesn't Match Today's Action (so far) -- And -- A Preview to a Simple Cynical Market Narrative

As I type, the S&P 500 Index has clawed its way back to a 4 point gain, while the Nasdaq Composite is now up an impressive, all things considered, 0.24%.

So the U.S. stock market's back from a messy couple of days! Well, not so fast. As I type, literally 60% of the S&P 500's constituents are down on the morning, while just shy of 70% of the Nasdaq's members are currently bleeding.

Morning Note: Feels a bit like Q4 2018

At roughly the two-minute mark in last weekend’s video commentary I mentioned the seeming sanguineness of a most-respected macro analyst around how equity markets would react to the Fed tapering its monthly bond purchases. I then said the following:

This Week's Message: A Snapshot of What We Think We're In For -- And -- Brief Narratives on Gold, Ag and Non-US Equities

For this week's main message I'll share an excerpt from my latest internal log entry, where I briefly update our theses on individual positions. Specifically, non-US equities, gold and ag futures. But first, my thoughts on today's market reaction to the release of the Fed's latest meeting minutes.

Morning Note: Housing Hurting

As we've previously discussed herein, folks (survey respondents) think it's, frankly, an awful time to go buying a house. That, by the way, was confirmed in the latest from the widely followed University of Michigan Consumer Survey.

Supposed to be weird right here...

Clearly, there's lots (LOTS!) going on in the world for the equity market to get the jitters over. There's also, as I mentioned in our recent technical look at gold and U.S. equities, seasonality:

Morning Note: Retail Sales Miss -- Do or Don't Do China? -- And -- How the "Big Money" is Not Made

Our October 30, 2020 Macro Update was subtitled "Pulling Forward." Here's a snippet:

Morning Note: Inflation's Doing a Serious Number on Sentiment -- And -- Narratives (for sure!) Drive Markets

A Chinese data miss, the delta spread and the disheartening scenes from Afghanistan has global equities (save for India's) heading south to start the week.

Macro Update: Shipping #s Off, Sector Action Bullish -- And -- Why Washington Might Love a Correction Right Here (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:

Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Morning Note: It's Either Higher (price) or Lesser (quantity), Or Both -- And -- It's Constraints That Count

Lots to parse in our weekly macro exercise today, so I'll keep this morning's note short and sweet.

So, according to an Evercore ISI survey, retailers are presently able to pass higher costs onto the consumer:

Morning Note: The Mark Twain Trade

It's probably safe to say that reports of the death of the reflation trade have been greatly exaggerated. Of course our longer-term base case firmly supports that notion. The past few days have seen growth (read tech) give way (notably) to the likes of industrials, materials, financials and so on.

This Week's Message: The Inconvenient Truth About Today's Bond Market Signal...

I’m reading lots of commentary these days from macro players who still see the bond market as a legitimate signal of general conditions.

They tend to also see inflation right here as transitory phenomena; believing that once covid-driven bottlenecks are relieved we’ll see the costs of goods and services descend to notably lower levels, and/or we’ll see the future rate of inflation slow, and meet right back down with that sub-2% trend.

Morning Note: Good luck moving OPEC...

So, inflation remains hot, but presumably not as hot as some expected this morning's CPI report to print, and word has it that the Biden Administration is urging OPEC to open the oil taps a bit more. 

With regard to the latter, the message is, help us out here, we're going to be spending hugely* and we need to get the inflation bug off our back...   

Morning Note: Jobs Galore! -- And -- "A Messy Multipolar World"

From last Tuesday's morning note:

"Presumed noble intentions notwithstanding, and while, indeed, the Delta variant may represent heightened deterrent for the careful would-be job-seeker, aggressive government intervention can't help but lead to market distortions; labor market included..."

Gold and Stocks Technicals -- And -- Long Term Trends (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:

Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Morning Note: About Last Night -- And -- "Paradigm Shifts" That Matter

Last night was something to behold during the Asian session. The volatility was notable in equity futures, in tech in particular, but it was extreme in the precious metals space. Here's Peter Boockvar's take:

Macro Update: Car Sales Tanking, Jobs Numbers Rising -- And Will Inflation Last? Well, It Better! (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:

Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Morning Note: Why Our Approach

So ya'd think on a morning when the official jobs number comes in just shy of a million that the stock market would be screaming higher, wouldn't ya?

Morning Note: A Dangerous Ethos

Per this week's main message, pundits who believe we're to revert right back to the inflation setup (none to speak of) of the past several decades point to the signals of a bond market that is anything but a legitimate market/economic signaler these days. It, in a sense, signals whatever the Fed desires it to signal -- which would be that inflation this go-round is "transitory" and, therefore, the Fed's free to print at will, to suppress interest rates ad infinitum and to essentially fund federal deficits as far as the eye can see.

This Week's Message: The One Thing (the only thing) I Absolutely Know

Sharing my latest entry to our internal log as this week's main message:

8/2/2021
Interesting; reading all the commentary around the economy, inflation, financial markets, etc. Credible macro players who sit in the deflation camp are understandably pounding their chests with “see, the reflation trade is already dead” as the 10-year yield sinks below 1.2%.

Morning Note: Presumed Noble Intentions Notwithstanding

ADP's jobs number whiffed expectations by a mile this morning, seeing bond yields lower and the gold price higher on the news.

Morning Note: Inflation's A Must

Fed Chair J. Powell suggested in last Wednesday's press conference that inflation was concentrated in select areas of the economy.

Here was my take last Thursday morning:

Morning Note: Feeling Copper

15 of the 24 July global manufacturing purchasing manager's indices that were posted overnight showed declining sentiment readings (vs June's). With presently covid-stricken areas of Asia of course faring the worst. 

Quotes of the Day: The Ongoing Commodities (and producers) Setup

While, like all tradable markets, the commodity space will absolutely see its share of volatility* (down and up) in the months and years to come, as we've firmly stated herein, in our view the longer-term setup remains historically-attractive.