Tuesday, January 24, 2023

Morning Note: Uninspiring Risk/Reward

So, if there's one graph (other than the one for our own index) that illustrates what has us not yet believing this year's rally in equities, it's this one (the Leading Economic Indicator/Coincident Economic Indicator Ratio):

Why? Well, other than its relationship to past recessions (red shaded areas), I'll fold in the aggregated corporate earnings for S&P 500 members:

And while I'm at it, might as well include the S&P 500 itself:

Yep.... the risk/reward setup right here remains uninspiring.

Asian stocks were mostly lower overnight, with China shuttered this week for the lunar holiday... Japan, however, once again bucked the trend, with a 1.5% gain on the session.

Europe's on its heels so far this morning, with 17 of the 19 bourses we follow trading down as I type.

US stocks are lower to start the session: Dow down 188 points (0.56%), SP500 down 0.70%, SP500 Equal Weight down 0.83%, Nasdaq 100 down 0.68%, Nasdaq Comp down 0.71%, Russell 2000 down 0.72%.

The VIX sits at 20.41, up 3.03%.

Oil futures are down 0.82%, gold's down 0.68%, silver's down 1.00%, copper futures are down 0.90% and the ag complex (DBA) is up 0.46%.

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

Among our 36 core positions (excluding options hedges, cash and short-term bond ETF), only 4 -- AT&T, Brazil equities, ag futures and treasury bonds -- are in the green so far this morning. The losers being led lower by AMD, Dutch Bros, MP Materials, Albemarle and oil services companies.

"...there is a real economy and there is a financial economy, and the two are closely entwined but different."

--Dalio, Ray. Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail 

Have a great day!

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