Monday, October 31, 2022

Morning Note: This Week's Minefield

So, let's call them land mines -- the events this week that markets will find themselves tiptoeing through.

Arguably, the potentially most explosive being the November Fed Policy Meeting come Tues/Wed... A .75% rate hike is 100% baked in - so no surprise there... Also, and most-importantly for traders, what markets have recently baked in is a softening of the tone in the post-meeting announcement, and, therefore, in J. Powell's presser.

That tone-softening isn't as much about inflation peaking already, or anytime soon (as the case may be), but about overall financial stability -- as global credit markets seem to be showing some signs of squeezing for liquidity; although, a tad bit less-so over the past week or so -- which I suspect is in response to the, at the margin, softer Fed-speak of late.

Now, the above said, the markets having sprung back the past couple of weeks may perhaps inspire a little less cuddliness from J. Powell and company versus what traders seem to be presently discounting.

 I.e., if the Fed doesn't stroke markets with talk of pausing rate hikes early next year, as traders expect, look out below (for equities) come the close on Wednesday... If, on the other hand, the Fed indeed confirms their concerns over the risks in running too far too fast, well... stocks will very much like the sound of that.

In addition to the Fed meeting, this week will deliver ISM PMIs, job openings data, US unit labor costs, inflation numbers out of Europe, a rate decision from the Bank of England, US jobs numbers, and another 150 members of the S&P 500 reporting their Q3 earnings numbers...

On the foreign front over the weekend, Brazil brought Lula back into office in a squeaker of an election yesterday... And while markets have every right to worry about what his platform might deliver in terms of fiscal irresponsibility, they nevertheless have history on their side, as they, frankly, performed quite well during his previous term in office...  China delivered recessionary PMIs as they continue to hamstring their economy with ongoing -- and in some regions increased -- Covid restrictions... Although, on the other hand, they're nevertheless stealthily trying to ease in that regard when it comes to select inbound foreign -- investment related -- travel. 

Stay tuned...

Asian traded in the green overnight, with 12 of the 16 markets we track closing higher.

Same for Europe so far this morning, with 16 of the 19 bourses we follow trading up as I type.

US stocks are red to start the session: Dow down 117 points (0.36%), SP500 down 0.51%, SP500 Equal Weight up 0.55%, Nasdaq 100 down 0.77%, Nasdaq Comp down 0.74%, Russell 2000 down 0.29%.

The VIX sits at 26.92, up 4.54%.

Oil futures are down 0.99%, gold's down 0.44%, silver's down 1.30%, copper futures are down 1.22% and the ag complex (DBA) is up 1.04%.

The 10-year treasury is down (yield up) and the dollar is up 0.61%

Among our 35 core positions (excluding options hedges, cash and short-term bond ETF), 6 -- led by ag futures, Amazon, energy stocks, Dutch Bros and metals miners -- are in the green so far this morning. The losers are being led lower by base metals futures, Sweden equities, AMD, uranium miners and Albemarle.

"Politics/Systems: the larger the population, the lower the trust among its members. Since socialism is based on an immense level of trust, it can thus only work at the family level. You’re a lunatic if you trust your central government as much as you trust your mother."

Andrei, Vizi. Economy of Truth

Have a great day!


  1. Thanks for today's updates. Lula has a huge comeback from corruption charges in 2017 to become the third term President of Brazil.

  2. It seems like weekly unemployment claims have been on the rise for the several of weeks already. What do you think of this Friday Job Report to look like?

    1. Don't have a view on this week's jobs number Sam... Definitely some brewing weakness in spots, but I don't believe we're close to seeing jobs rollover just yet... I suspect traders will be more reactive to the wage data (inflation) than the actual jobs number, unless of course it's a shocker, in either direction...