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We'll save our commentary on this morning's GDP report for our weekend update, but I would like to share a quote from Peter Boockvar's summary this morning.
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Here are some key highlights from our latest messaging herein:
Yesterday:
"As for the notion that tech's a screaming buy because interest rates are coming down (i.e., because inflation -- and the economy -- is weakening), well, that's like saying tech stocks should be treated like bond investments, as opposed to companies with earnings generated by things like consumer spending, demand for chips, corporate ad spending and so on -- i.e., things that go down when the economy goes down."
Why own tech stocks right here? Or, perhaps a better question, why have tech stocks rallied so much this year?
I'm thinking the answer is simple; tech stocks, all else equal, do well in a low/lowering interest rate environment... Plus, they got literally hammered last year and, thus, at first blush -- and in that the group is still down 16% from the pre-bear peak -- folks think they're cheap.
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Yesterday, in the following, Bloomberg offered up the history that explains our prevailing message herein:
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Let's, for a change, consider a little good economic news this morning.
As we perpetually assess general conditions we pay close attention to the highly/globally-respected Sentix Economic Sentiment Surveys.
The following describes their usefulness (click here for more):
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In their "daily insights" yesterday, BCA essentially echoed what we've been preaching for months:
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Small business employs ~60% of American workers, and the National Federation of Independent Business (NFIB) is the go-to for sentiment in that space.
The NFIB monthly small business sentiment survey is an input to our own general conditions index... March's results were released this morning, and, well, OOF!!:
Note the present trend of our 3 metrics, and the trends heading into past recessions (red shaded areas):
The immediate aftermath of last Friday's jobs report saw the market -- via Fed funds futures -- go from discounting a 40% chance of a quarter-point rate hike at the May meeting to over 70%.
Note: Early in the presentation I said 18% of our "positions" are scoring negative... I meant to say "inputs." I.e., I want to be sure and distinguish that I was referring to inputs (data) to our general conditions index (denoting high recession risk), as opposed to investment positions we're presently holding...
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Below are some key highlights from our latest messaging herein:
...clearly, the bulls are not shaken by the latest data... Which would be the Pavlovian response to the notion that sweet Fed policy for markets always follows sour data... And that makes sense, except that is -- as I illustrated in a recent video presentation -- when we're in recession... This, in that instance, would be your classic "bull trap" (investors rush in based on sketchy narrative, only to, sadly, be ultimately caught by an opposing reality).
As for Sunday's surprise OPEC production cut; yes, of course, it reflects concern over the state of the global economy, and, therefore, anticipated weaker oil demand going forward.
Monday:
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Chatting with a buddy yesterday who works in the shipping space, I asked about the recent increase in heavy truck sales, which, as I stated in last week's economic update, flies in the face of our general recessionary outlook... This was after he explained to me that his world is unusually/concerningly quiet of late... I.e., they did not see remotely the quarter-end activity that they normally do... With regard to heavy truck sales, he surmised that it reflects the aftermath of the lack of supply around the pandemic craze, and now supply finally reaching the market.
Which jibes with my highlight below from Peter Boockvar's take on the latest auto sales numbers:
