Tuesday, November 28, 2023

New Sherriff In Town!

I can’t emphasize enough how markets, (monetary) policymakers and politicians are so stuck between the proverbial rock and a hard place... Folks are asking if next year’s election gives us any pause in our economic assessment (recession odds elevated), for, as we know, all conceivable strings are pulled by incumbents to bolster the economy as election times near.  

My answer, yes, it does have me wondering if indeed stimulus (via, perhaps, Janet Yellen tapping the treasury general account) could ride in to stave off a contraction all the way into 2025... But, thing is, there’s this new sheriff in town who has a penchant for arresting the good feel that would otherwise be engendered by stimulus measures, and who did so big-time not that long after the free money floodgates (in political response to covid) were open to an extent beyond our wildest dreams. 

That sheriff’s name is inflation, and without a meaningful (but not necessarily severe) contraction (read recession) odds do not favor a sustainable return to the Fed’s 2% target… And of course a meaningful contraction is anything but politically desirable (well, for the incumbent team, that is) come 2024... Hence the expectation of fiscal stimulus should recession get near the imminent stage, which, alas, would see said new sheriff riding in with guns blazing, while putting the spotlight right back on the Fed who, election year or not, simply won’t be able to turn a blind eye.

Like I keep saying, there's lots to play out during whatever’s left in the present cycle... Thus, patience, and prudence, remain key for the time being.

Asian stocks were mostly green overnight, with 12 of the 16 markets we track closing higher.

Europe, on the other hand, mostly in the red so far this morning, with 15 of the 19 bourses we follow trading down as I type.

US equity averages are lower to start the session: Dow by 6 points (0.02%), SP500 down 0.17, SP500 Equal Weight down 0.25%, Nasdaq 100 down 0.18%, Nasdaq Comp down 0.22%, Russell 2000 down 0.72%.

As for yesterday’s session, US equities closed lower: Dow by 0.2%, SP500 down 0.2%, SP500 Equal Weight down 0.3%, Nasdaq 100 down 0.1%, Nasdaq Comp down 0.1%, Russell 2000 down 0.4%.

This morning the VIX sits at 12.81.

Oil futures are up 0.64%, nat gas futures are down 1.49%, gold's up 0.57%, silver's up 0.41%, copper futures are down 0.89% and the ag complex (DBA) is up 0.19%.

The 10-year treasury is up (yield down) and the dollar is down 0.20%.

Among our 32 core positions (excluding options hedges, cash and money market funds), 16 -- led by SLV (silver), EWZ (Brazil equities), GLD (gold), VWO (emerging mkt equities) and XLE (energy stocks) -- are in the green so far this morning... The losers are being led lower by URNM (uranium miners), Range Resources, Dutch Bros, LTPZ (long-term tips) and AT&T.

“Fast is fine, but accuracy is final. You must learn to be slow in a hurry.”

― Wyatt Earp

Have a great day!

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