Wednesday, January 5, 2022

Morning Note: Even then?

A slew of purchasing managers survey results were just released, sending what we'll call mixed (yet still on-balance expansionary) messages about the state of the global economy.

The biggy being yesterday's US ISM manufacturing survey which delivered a headline reading of 58.7 (above 50 denotes expansionary conditions), down from 61.1 for November.

New orders and production readings were off slightly from the previous survey, while the price index came down a notable 14.2 points (still rising, but at a slower pace). Backlogs were up a titch, as was the employment component. Supplier deliveries declined 7.3 points, while the inventory read was off a bit as well. Export orders declined slightly, import orders rose slightly.

As we've stated (barring increased covid restrictions and, say, a new round of stimulus checks), we do expect bottlenecks, as well as the rate of inflation, to ease as we move into the new year. With regard to the latter, however, we take little solace, as we believe inflation will be stickier and longer-lasting than the powers-that-be would like us to believe (although they've [here and there] been sounding a more realistic tune of late).

Here's the ISM report's bottom line:

“Manufacturing performed well for the 19th straight month, with demand and consumption registering month-over-month growth. Meeting demand will remain a challenge, due to hiring difficulties and a clear cycle of labor turnover at all tiers.
For the second month in a row, Business Survey Committee panelists’ comments suggest month-over-month improvement on hiring, offset by backfilling required to address employee turnover.
Supplier delivery rate improvement was indicated by the Supplier Deliveries Index softening in December. Transportation networks, a harbinger of future supplier delivery performance, are still performing erratically; however, there are signs of improvement.”

Asian equities were mixed overnight, with 8 of the 16 markets we track closing lower.

Europe's leaning green so far this morning, with 12 of the 19 bourses we follow trading higher as I type.

US major averages are mixed (tech continues to struggle): Dow up 72 points (0.20%), SP500 down 0.05%, SP500 Equal Weight up 0.32%, Nasdaq 100 down 0.54%, Nasdaq Comp down 0.58%, Russell 2000 down 0.02%.

The VIX sits at 16.68, down 0.83%.

Oil futures are up 1.79%, gold's up 0.47%, silver's up 0.28%, copper futures are down 0.61% and the ag complex is down 0.51%.

The 10-year treasury is up (yield down) and the dollar is down 0.37%.

Led by uranium miners, MP (rare earth miner), base metals miners, AT&T and Disney -- but dragged by solar stocks, AMD (chip maker), wind stocks, tech stocks and ag futures -- our core allocation is up 0.55% to start the session.

Even then?

"In 1931, Adolph Miller would testify before the Congress that the easing of credit in the middle of 1927 was “the greatest and boldest operation ever undertaken by the Federal Reserve System, . . . [resulting] in one of the most costly errors committed by it or any other banking system in the last years.”
Some historians, echoing the views of Hoover and Miller, see the meeting on Long Island as the pivotal moment, the turning point that set in train the fateful sequence of events that would eventually lead the world into depression. They argue that by artificially depressing interest rates in the United States to prop up the pound, the Fed helped fuel the stock bubble that subsequently led to the crash two years later."
--Ahamed, Liaquat. Lords of Finance: The Bankers Who Broke the World 

Have a great day!

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