Is there cause for optimism around equities heading into the fourth quarter? Sure. Is there nevertheless some serious risk in the overall setup? Yes. Should we, even if the optimists have it right, anticipate some serious volatility in Q4? Absolutely!
Ironically, much of the stuff that allows for optimism is the stuff that defines much of the risk as well.
Rising jobless claims (362k this morning vs 351k last week vs 335k the week before) fly directly in the face of evidence that says the economy's expanding.
Well, actually, maybe not.
Treasury yields are taking a bit of a breather after seeing quite the spike over the past week or so.
Our agriculture futures ETF now occupies a not-small position in our core portfolio. An article published this morning by Bloomberg titled The Country That Makes Breakfast for the World Is Plagued by Fire, Frost and Drought tells of why unpredictable weather patterns (disrupting production/sparking higher pricing) are a key part of our thesis:
So equity markets are feeling the jitters this morning. Question is, over what?
Well, in DC, well, it's a mess... Here's Bespoke Investment Group summing it up in their morning note:
Here's a snip from our July 14th of this year post (oil was $54 a barrel that day):
"As clients and regular readers have noticed, we remain bullish (long-term) on energy -- and I'm not talking just renewables right here.
In a nutshell, fossil fuel markets have seen massive capital expenditure reduction of late -- with the expectation of more cuts to come. I.e., we're talking less capacity to produce to an extent that we think massively overcompensates for the go-forward reduction in demand due to the adoption in renewables."
It's $74 this morning!
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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.
The latest Grant Williams Podcast featured Prerequisite Capital's Daniel Want. The following from that conversation speaks volumes about the unique market landscape we find ourselves presently traversing:
So it's September, the only month of the year that over the long-run sports a negative average annual return for the S&P 500 Index. And, so far, September 2021 hasn't disappointed.
Monday's release of NAHB's monthly homebuilder sentiment read had builders feeling a bit better about their current setup and essentially the same regarding future expectations, in comparison to the previous month.
In this week's main message I'll be touching on the China property bubble saga, the toppiness of U.S. equities, incentives (or constraints if you will) with regard to policy makers' approach to the financial markets and, amid palpable uncertainty, a few things we know for sure. Time permitting, it'll hit your inbox sometime later today or early tomorrow.
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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.
Well, this'll likely be the last you'll hear from me for the next week or so. Heading out soon for my annual trek to Montana to do a little fly fishing with a buddy and my dear friend Matt, the fishing guide whom I introduced you to a few years ago. I believe that blog post holds the all-time record for most hits. Linking it to last September's rendition. Note that this year I'll be out of the office Monday through Friday.
As for our weekly macro analysis, I'll keep this one brief.
As we've stressed herein over the past year, the present state of financial markets, by itself, does not allow the Fed to get, let's say, consequential, in terms of combating inflation going forward.
In his morning note economist Peter Boockvar suggests the following of the Fed:
I ran across the following Robert Oppenheimer quote while listening to a recorded lecture yesterday and got to thinking about how the desperation of policymakers, elected and appointed, to circumvent the painful (yet essential) stages of cyclical economic and market phenomena grows -- as do the tools they bring to bear -- with each cycle:
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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.
Generally-speaking, the initial market reaction to a bit of news or data doesn't always end up reflecting what ultimately becomes the, let's say, enduring market reaction. This morning, however, with regard to the July jobs data, I think the market's impulse is on the money.
There's virtually nothing in the morning data worth getting excited about. Jobless claims were a bit better than expected, the trade balance was as well, auto sales were abysmal but there we're talking lack of inventory, unit labor costs were up (productivity down) but there we're talking increased working hours, factory orders were a hair better than expected and the final durable goods number shows a 1% month-on-month decline. One could make a stink over European producer prices popping by 2.3% month-on-month, but no, as I type our Eurozone ETF is right there with the S&P 500 this morning, up a smidge.
The trade that keeps on ticking is large cap U.S. growth (read big tech). And the latest data, frankly, couldn't offer more support.
Global PMIs overnight confirmed that economies are indeed coming off the boil. Whether it's a natural come-down from what we'll deem an overdose of government stimuli or it's more about the delta variant, or a bit of both, remains to be seen.
