Monday, November 29, 2021

Morning Note: "We can only hope" -- And -- A Microcosm

As I type, the Dow's shaved a 300-point opening rally by two-thirds, while metals and materials (and their related companies) and global equities, while generally higher, lag notably... US consumer staples, industrial and financial stocks are actually in the red so far this morning.

Peter Boockvar nicely sums up what needs to be said in his morning note

"To spin the positive here, we’ve come a long way over the past 20 months in developing incredible vaccines and anti viral drugs and learning to live with something that seemingly will be following us around for a few years to come. I’ve said this for a while and particularly with Delta that we have no choice but to power thru with all the safety measures (all included) we’ve balanced since first socializing outside again last spring/summer after the initial lockdowns."

"Assuming the vaccines still maintain a high level of effectiveness (remember that the flu shot is only 50% efficacious), the Fed should continue on with the taper, even at the faster pace hinted at as it will only be the fed funds rate that will be the right tool needed in dealing with inflation or at least give them the flexibility to do so as it is the only thing that can directly target the demand side. That’s what they should do. What they will do is go slow as they always do when attempting to take away the punch bowl. We can only hope that omicron won’t result in more supply chain problems.

Buy the dip in commodity related areas like energy, ag and the precious metals."

While, given seasonality for equities, if you're a short-term trader (and you're optimistic on the variant), I sympathize with the buy-the-dip notion right here. Definitely so with regard to "areas like energy, ag and the precious metals" if you're a long-term investor. Nevertheless, Friday's action should be viewed as a microcosm of the potential that exists in an equity market that, among other things, trades at historically-high valuations...

Asian equities mostly sold off overnight, with 11 of the 16 markets we follow closing lower.

Europe's bouncing back a bit from Friday's drubbing so far this morning, with all but 1 of the bourses we follow higher as I type.

US major averages are in the green to start the day: Dow up 99 points (0.28%), SP500 up 0.99%, SP500 Equal Weight up 0.63%, Nasdaq 100 up 1.63%, Nasdaq Comp up 1.49%, Russell 2000 up 0.64%.

(Look for tech (heavily the Nasdaq averages, and nearly 30% of the SP500) to outperform while new variant worries persist. That said, even this morning, the Nasdaq Comp exhibits concerning breadth readings [nearly half of its members are in the red as I type]).

The VIX sits at a concerning 24.33, although that's down 14.99% so far this morning.

Oil futures are up 4.59%, gold's up 0.11%, silver's down 0.50%, copper futures are up 0.91% and the ag complex is down 0.43%.

The 10-year treasury is down (yield up) and the dollar is up 0.22%.

Led by MP (rare earth miner), AMD (chip maker), KRBN (carbon credits), SOXX (chip makers) and all things tech -- but dragged by Viacom/CBS, AT&T, metals miners, Verizon and Latin American equities -- our core portfolio is up 0.17% to start the session.

Here's Ed Yardeni, in his book Fed Watching, quoting former Fed chair William McChesney Martin:

“The idea that the business cycle can be altogether abolished seems to me as fanciful as the notion that the law of supply and demand can be repealed.”

Have a great day!

No comments:

Post a Comment