Thursday, September 15, 2022

Morning Note: The Retail Investor Force

 I expressed the following in yesterday's morning note:

"...we've come full circle. Globalization has, at least politically-speaking, run its course -- while wealth and income inequality have reached historic proportions. Therefore, the kinds of labor/consumer-friendly, protectionist, inflation-stoking policies that predated Volker, Regan and Thatcher are resoundingly back in vogue."

This from economist Peter Boockvar yesterday highlights present developments that reflect that notion: 

" seems now almost every day there is some union screaming out for more pay and benefits. We of course are seeing it big time with the railroad worker unions ahead of the deadline this weekend."
" the WSJ, “Thousands of Minnesota Nurses Go on Strike Over Retention, Staffing, Pay…The strike is believed to be the largest ever work stoppage by private sector nurses in the US, according to the Minnesota Nurses Association.” Now some of these nurses saw their contracts expire in May and others in June and 15,000 went on strike. The nurses want a “27% pay bump over three years, the union said.” They are being offered a 10% increase over three years and “an immediate 1% bonus.”"
"...from Weyerhaeuser yesterday, the major wood products and timberland owner who said “as of this morning a work stoppage involving members of the International Association of Machinists and Aerospace Workers union is impacting its operations in Oregon and Washington.” The two sides have been negotiating since May."

Make no mistake folks, this is inflationary stuff, of a very sticky nature! 

As for the latest stock market action, presumably, retail investors remain a serious force in the present landscape. 

Here's Bloomberg's Tatiana Darie on the topic:
"Individual investors have bought stocks again when everyone else was selling. But the risk of them throwing in the towel has risen, particularly if equities were
to re-test this year’s lows.

At $2 billion, Tuesday saw the second largest day of retail net flows into US stocks this year, according to the latest report from Vanda Research. But individual traders have decreased their participation over the past month and a larger selloff in stocks could force them to the sidelines. After all, they’re still sitting on hefty YTD losses of about 35%, a Goldman Sachs basket of retail favorites shows."
Well, indeed, they've been a force on the way up, as well as off the bottoms of dips of late... Ultimately, given their not-small presence, and, we presume, their very visceral connection to their trading successes and failures, they'll likely prove a major force in this bear market's next leg down as well.

In yesterday's video snapshot, while I was more non-committal than usual with regard to the market's near-term technical setup (while remaining bearish beyond the very near-term), I did mention that "technically-speaking this looks short-term promising for the bulls. " And while the session saw the SP500 tease both the bulls and the bears throughout, when the final bell rang the index was sitting .34% above Tuesday's closing price. The August Core PPI (Producer Price Index) print that came in a hair cooler (month-over-month) than expected -- a relief to the bulls after Tuesday's CPI shocker -- certainly didn't hurt. 

As for this morning's data releases, three things of note: "Headline" retail sales for August came in above expectations (although, "core", not so much), which supports our mild-recession thesis, but of course doesn't quell concerns over inflation... Same can be said about a weekly jobless claims number that came in lower for the 5th straight week... Industrial production, on the other hand, contracted in August.  Hmm...

On an unambiguously immediate-term positive note, the rail strike that was set for this weekend looks like it's been called off, as the railroads and the unions have come to a tentative agreement... 

Beyond the "immediate-term," à la my "sticky nature" of certain inflationary forces comment above, the agreement features a 14% immediate pay increase.

Stay tuned...

Asian equities leaned red overnight, with 9 of the 16 markets we track closing lower.

Europe's struggling so far this morning as well, with 12 of the 19 bourses we follow trading down as I type.

US stocks are lower to start the session: Dow down 65 points (0.20%), SP500 down 0.45%, SP500 Equal Weight down 0.16%, Nasdaq 100 down 0.72%, Nasdaq Comp down 0.65%, Russell 2000 down 0.54%.

The VIX sits at 26.83, up 1.80%.

Oil futures are down 2.02%, gold's down 0.86%, silver's down 1.24%, copper futures are down 0.72% and the ag complex (DBA) is up 0.32%.

The 10-year treasury is down (yield up) and the dollar is up 0.05%

Among our 35 core positions (excluding options hedges, cash and short-term bond ETF),  -- led by Dutch Bros, healtchare stocks, MP Materials, ag futures and AT&T -- are in the green so far this morning. The losers are being led lower by energy stocks, Albemarle, AMD, utilities stocks and uranium miners.

“A theory is more impressive the greater the simplicity of its premises, the more different the kinds of things it relates and the more extended its range of applicability.” --Albert Einstein

Have a great day!

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