Thursday, August 31, 2023

Morning Note: THE Question -- And -- The Surfer Mentality

 This from BCA Research yesterday --

"The question going forward is whether US economic resilience will continue. The latest employment data from the JOLTS survey and ADP release suggest that labor market conditions are easing amid the Fed’s aggressive tightening cycle. This trend will probably continue over the coming year and we believe that a recession is likely in 2024."

-- essentially jibes with our message in Tuesday evening's video.

And the following (continuation from the above) --

"Meanwhile, an alternative scenario of resilient economic growth is not necessarily positive for risk assets either. Strong growth conditions amid continued labor market tightness threatens to unleash a second inflation wave which could prompt the Fed to hike again – which is ultimately bad for stocks. Maintain a defensive portfolio tilt over a 12-month horizon."
-- more or less echoes this excerpt from our internal market log that I featured in the video:
"...should the positive stars essentially align, and recession is averted, we can assume that inflation will remain quite stubborn; effectively not allowing the Fed to ease off the tightening pedal… In which case, we’re back to the typical Fed-tightens-till-the-economy-breaks scenario."
So, yeah, whether or not the economy holds up and what -- either way -- it means for markets is the question that will indeed be answered over the coming months.

Personal consumption data didn't move the market needle this morning, but worth noting was the 0.8% pop in consumption, against a disappointing 0.2% increase in personal income... While PCE inflation came in 0.3% higher (to 3.3%) year-on-year, while coming in, as expected, at 0.2% month-on-month.

Tomorrow's jobs report is potentially short-term big for markets... We'll tackle that in our end of week snapshot and economic update.

Stay tuned.

Asian stocks struggled overnight, with 11 of the 16 markets we track closing lower.

Europe's leaning green so far this morning, with 13 of the 19 bourses we follow trading up as I type.

US equity averages are higher to start the session: Dow by 114 points (0.33%), SP500 up 0.20%, SP500 Equal Weight up 0.09%, Nasdaq 100 up 0.27%, Nasdaq Comp up 0.31%, Russell 2000 up 0.40%.

As for yesterday’s session, US equity averages closed higher: Dow up 0.1%, SP500 up 0.4%, SP500 Equal Weight up 0.3%, Nasdaq 100 up 0.6%, Nasdaq Comp up 0.5%, Russell 2000 up 0.4%.

This morning the VIX sits at 13.74, down 1.01%.

Oil futures are up 1.45%, nat gas futures are down 1.75%, gold's up 0.05%, silver's down 0.04%, copper futures are down 0.42% and the ag complex (DBA) is up 0.02%.

The 10-year treasury is up (yield down) and the dollar is up 0.49%.

Among our 34 core positions (excluding options hedges, cash and money market funds), 21 -- led by MP Materials, HACK (cyber security stocks), VNM (Vietnam equities), Dutch Bros and XLK (tech stocks) -- are in the green so far this morning... The losers are being led lower by EWZ (Brazil equities), JNJ, VWO (emerging mkt equities), FEZ (Eurozone equities) and LEMB (local currency emerging mkt bonds).

Smart experienced surfers and smart experienced investors have much in common:
The surfer knows that they don't have to ride every single wave that comes their way. They have the freedom and the power to choose which waves to take, and which waves to let pass by. --Sahil Bloom

As, alas, do inexperienced surfers and investors: 

When you're young, you want to ride every single wave. But when you catch the first wave that comes your way, you may miss the better one that came right after it. Learn to pass on more waves and wait for the right one. --Sahil Bloom

Have a great day!

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