Tuesday, February 27, 2024

Stock Market Snapshot: Not What An Early-Stage Bull Market Typically Looks Like (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Morning Note: The 'F' Word -- And Your Weekly Results Update

If you're getting tired of hearing about inflation, or the potential lack thereof going forward, sorry, this will be a top topic of discussion for I suspect many years to come.

As for the time being, recent "hotter" than expected CPI and PPI -- potentially PCE this week -- notwithstanding, I do believe that before the current cycle runs its ultimate course, those who, on behalf of their stock positions, pray for dis(or de)flation will indeed see their prayers answered in the affirmative.

Thing is, beyond the knee-jerk rally that'll no doubt come on "cooler" inflation data and sweettalk from the Fed, there's, alas, that 'F' word that'll ultimately be rolling off the tongues of many a Wall Street analyst, economist, market guru, yada yada!

Sunday, February 25, 2024

Pockets Of Strength, What the Fed -- Despite Their Panicky Impulses -- Hopes to Avoid, and Ubiquitous Copper (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Friday, February 23, 2024

Game Still On For AI Stocks, And An Overall Equity Market, Yields and Dollar Snapshot (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Thursday, February 22, 2024

Morning Note: While Some Key Conditions Improve, Leading Indicators Still Warn, And Healthcare Well-Positioned

The following from BCA's narrative around this week's US Leading Economic Indicators (LEI) release should sound very familiar to clients and regular readers:

"Indeed, the US economy has been robust and the data do not point to an imminent recession. Financial conditions have eased, home prices have risen and consumer sentiment has rebounded. All these factors are supporting economic activity.

However, our base case remains that a recession is likely in late 2024 or early 2025. Beneath the surface of the resilient labor market, some of the leading indicators are weakening. Similarly, default rates on credit cards and auto loans have risen and the tailwind from excess pandemic savings is fading.

Tuesday, February 20, 2024

Stock Market Snapshot and a Look at NVDA's Technical Setup (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Morning Note: “Beware the Ideologue” And Your Weekly Results Update

Not much to add this morning to our weekend video update, except perhaps the following on objectivity, and humility (absolute must-have qualities if one is to be a successful investor) from William Bernstein's outstanding volume The Delusions of Crowds: Why People Go Mad in Groups:

“…the more points of view a group brings to bear on an estimate, the more accurate that estimate is liable to be. Diversity of opinion also benefits the individual as well; as put by F. Scott Fitzgerald, “The test of a first-rate intelligence is the ability to hold two opposing ideas in mind at the same time and still retain the ability to function.” 

Over the past three decades, psychologist Philip Tetlock has examined the forecasting accuracy of hundreds of well-regarded experts; he found that those who took into account a wide variety of often contradictory viewpoints performed better than those who viewed the world through a single theoretical lens. In plain English: beware the ideologue and the true believer, whether in politics, in religion, or in finance.”

Sunday, February 18, 2024

Labor Hoarding, Households and Homebuilders Happier, Small Businesses Not, Inflation Forces and Some Corporate Commentary (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Friday, February 16, 2024

Stagflationish Data, Sentiment Extreme, When We'll Be Buyers, And That Dangerous Soft-Landing Narrative (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Thursday, February 15, 2024

Morning Note: Hints of Stagflation, And Some Key Highlights

In our last video commentary I mentioned the term “stagflation” — a stagnating economy amid sticky, or rising, inflation — as a distinct go-forward possibility.

Well, this morning’s data releases certainly don’t conflict with that concern.

As for the economy side of that narrative*:


That's quite the miss: -0.8 month-on-month for headline vs -0.1 expected (plus a -2% revision for December) -- as well as a -0.5% print against +0.2% expectation for core (ex-cars and gas).

As for inflation:


Again, quite the miss: Import price expectations were for a decline of -0.1% month-on-month; what we actually got was a whopping 0.8% increase. As for exports, prices also popped 0.8% m-o-m, vs a -0.2% expectation... On a year-on-year basis, prices did contract, but at a bit slower pace than the previous print.

*Note, a potential factor to consider that may have impacted the retail sales numbers was the messy January weather.

Stay tuned...


Here are some key highlights from our latest messaging herein:

Wednesday, February 14, 2024

Beyond the Short Term, Today's Hot Inflation Print Is Not the Big Risk for Stocks (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Tuesday, February 13, 2024

Morning Note: On the Other Hand.....

Yesterday I shared a thread by BCA Chief Strategist Peter Berezin, who now sees likely weakness among US consumer and, thus, the US economy as well in the coming months... That scenario would be met with falling yields.

Today, in contrast, I'm offering up the alternative scenario from Bianco Research's Jim Bianco, who sees no recession this year, and anticipates rates breaking to the upside over the coming weeks.

As we've expressed herein, the market's in a tough spot right here... In the recession scenario, corporate earnings take a hit, and, believe me, stocks are in no way priced for it right here... In a no-recession scenario, yields do not decline -- per the below, according to Jim they rise -- and, alas, stocks are in no way priced for that either, per this morning’s initial reaction to January’s CPI print:

Monday, February 12, 2024

Morning Note: "Consumer Reality Tour" -- And Your Weekly Results Update

BCA chief strategist Peter Berezin was not in the heavily-crowded recession camp last year... He estimated -- correctly! -- that, despite the plethora of leading indicators screaming otherwise, the consumer's momentum and resources would keep the economy chugging along throughout 2023.

Per the below, his 2024 analysis paints an altogether different picture:

Friday, February 9, 2024

Receding Recession Risk in Context, And Why Stock Market Breadth Matters (video)

Clients, here's another important one to take in when you have a few minutes... Thanks! Have a Great Weekend!

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Stock Market Snapshot: A Quick Look at the Technicals (video)

Just a quick note in front of today's brief video update (click "read more" below to view).

I don't believe we can over-emphasize how unusual, and unhealthy, the internal breadth setup has been for the equity market.

As I stated yesterday, the Nov/Dec rally of last year was actually very healthy from a breadth perspective, but as we entered the new year it quickly, and dramatically, deteriorated... And this morning's action is no exception.

As I type, the S&P 500 is up 0.29%, however 58% of its members, and 8 of its eleven sectors, are in the red... The Nasdaq 100 is up 0.75%, while 47% of its members, and 6 of its ten sectors, are in the red as well... The S&P 500 Equal Weight Index is actually down 0.14% on the morning (which jibes with the breadth readings).

In my next video (which you'll receive in your inbox tomorrow morning) I'll, once again, offer up some historical context that illustrates why this is on our radar.

Thursday, February 8, 2024

Morning Note: An Improving, Yet Dubious, Setup

In thinking through the dynamics of the past few months, I come up with 2 key observations/assumptions.

1. The impressive rally in the equity market last November and December reflexively showed up in some improved data, as it clearly reignited animal spirits among businesses and consumers (the latter in particular).

For example, here are the latest sentiment readings on the consumer: 

Conference Board Consumer Confidence:

Tuesday, February 6, 2024

While Equity Mkt Conditions Ain't Pretty, Financial Conditions Have Eased -- But Be Careful What You Ask For! (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Morning Note: Equity Market Conditions Rolling Back Over

Per the following intro to our latest Equity Market Conditions Analysis, which reflects in the scoring of our own Equity Market Conditions Index (EMCI), after a notable improvement heading into January, our assessment of equity market conditions has since rolled back over -- taking it deeper into the red.

Please keep in mind that this monthly analysis is in no way designed, or intended, to be a market timing indicator... But rather, it serves as a general assessment of the present risk/reward setup for primarily the US equity market; as history has proven, time and again, that stock market action -- in either direction -- can defy fundamental logic for extended periods of time.

Ultimately, however, and make no mistake, even in a world where powers-that-be strive mightily to keep asset prices elevated, fundamentals do tend to matter! 

Now, all of the above, and the below, said, we have seen some recent improvement in overall economic conditions -- i.e., odds still favor recession going forward, but less-so of late... This is something we're of course paying very close attention to.

Our bottom line: Our aim here at PWA is to manage our clients' long-term assets in a manner we deem most prudent from a risk/reward perspective, given our deep, ongoing assessment of global macro conditions.

Monday, February 5, 2024

Morning Note: Tops are Choppy -- And Your Weekly Results Update

So, if you're paying attention to the markets, and you have feelings about what you're hearing and seeing, I strongly encourage you to take in our twice per week videos! While, granted, I can get overly technical, I promise, you will always get the main message.

Here's from this weekend's (recorded Friday):

"I don't mean to sound like such a skeptic folks, I just want to articulate what tops look like; tops in the economy, tops in the markets, and so on... Tops are difficult, they are choppy, they can take a long time... Once they give up the ghost they can be quite dramatic to the downside... What do they say? "They take the escalator up and the elevator down."  And I'm not promising that there is an elevator down scenario in our near-term future, I'm just saying that the risk remains very high, and there's nothing about today's action that changes that." 
In fact, per the video, the character of "today's action (Friday's)" actually confirms that the risk remains high.


Here's your weekly sector, region and asset class update:

Friday, February 2, 2024

Stocks Went Up Today, Or Did They? Amazon/Meta Thoughts, Stock-Price Shepherds, and A Confusing Jobs Report (video)

Clients, here's an important under-the-surface analysis to be sure and take in!

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Thursday, February 1, 2024

The Fed's Conundrum... Investor Amnesia? Is This Time Different? And An Investable Regime to Come! (video)

Note, yesterday's price action (strong by the close) in equities accurately anticipated strong earnings results out of Meta and Amazon (not so much from Apple) that carried over into post and pre-market futures trading. However, this morning's shockingly strong jobs number (nearly double the consensus expectation) -- doing quite the upside number on yields and the dollar -- has taken virtually all but a handful of tech stocks (that dominate the S&P and the Nasdaq) into the red as I type (26 minutes after the open). 

While the day is still young, literally 79% of the stocks in the S&P, and 76% of those in the Nasdaq are presently in the red.

Now, as we'll explore in this week's economic update, while the monthly jobs number is important, and often market-impacting, make no mistake, it is very much a lagging indicator, as it covers the previous month, plus revisions for the months leading up to it... Weekly jobless claims (higher than expected yesterday), and job openings and quits rates (rolling over), are historically very good leading labor market indicators.

I.e., while December's numbers were indeed impressive (although bearish for markets yearning for Fed cuts), their sustainability is in serious question going forward.

Yesterday's video (below) is not one to miss:

Morning Note: The Ultimate/Obvious Conundrum

Yesterday's QRA (we've explored this topic herein this week) wasn't quite what the market (the bulls) expected, but it nevertheless didn't seem to move the needle when released -- i.e., it didn't move the S&P and the Nasdaq -- suffering from disappointing news from the tech space -- out of their pre-market red.

As the morning progressed, news came out that New York Community Bancorp reported a surprise Q4 loss and a cut to its dividend... Commercial real estate loan exposure was the culprit, which, as you might imagine, spooked equities and kept a bid under bonds.

Then came the Fed announcement, that essentially poured cold water all over the bulls' notion that rate cuts are to begin come March.

Tuesday, January 30, 2024

Market Snapshot: Charts Update (video), But First, Some Key Stats

Dear Clients, please be sure and take these videos in when you can... In them we address what's churning underneath these celebrated "record highs" that the media seems so enamored with of late.

For example, here's a look at where the SP500, the SP500 Equal Weight (a truer look at the overall market), and the Russell 2000 indices presently sit vs the SP500s previous all-time high:


And, speaking of the SP500, here's a look at the performance by sector since that January 2022 high, note that 7 of the 11 remain in the red... I.e., this is what you'd call historically bad breadth... And while things can definitely improve on that front, what we're looking at right here is anything but the character of a healthy equity market:

Morning Note: Market-Friendly QRA -- And -- UBS and JPM Share Our Concerns

In our latest economic update I mentioned the Treasury Quarterly Refunding Announcement (QRA) as being potentially bigger this week than even the Fed meeting.

While yesterday's announcement of the anticipated debt issuance needed this quarter
 (came in less than expected) definitely juiced the equity market,

Saturday, January 27, 2024

Economic Update: Traveling Through Soft Landing Valley (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Thursday, January 25, 2024

Market Snapshot: Good Time to Be Patient, Per Breadth, Sentiment, and the Technicals (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.


Morning Note: From Tech to Plane Tickets, From Homebuilders to Booze, etc. -- A Mixed Bag of Company Commentaries

With earnings season now in full force we thought it timely to offer up some highlights from company commentaries.

I color-coded the text to express our view of the messaging therein.

As you'll see, it's quite the mixed bag out there.

While the attitudes of the execs of the companies featured hold different degrees of economic relevance, if we were to nevertheless treat them equally, and score the below like an index, +100 to -100, it would come in at a mere +4.17, with 33% of the comments scoring economically positive, 29% negative and 38% neutral.

Tuesday, January 23, 2024

Soft Landings, Noisy Action, Russel Resistance and Rising Dispersion (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Morning Note: "Soft Landing" Searches Near-Record -- And -- Will "AI Optimism" Do The Trick (Again) In 2024?

The number of Bloomberg articles mentioning soft landing has reached a level not seen since the early 2000s -- as represented by the blue line in the chart below.

Per the chart, this doesn't necessarily paint a comforting picture (grey areas highlight past recessions) -- call it, save for the one exception, a contrarian indicator:   HT Daily Shot

Monday, January 22, 2024

Morning Note: Labor, "Underneath the Surface" -- And -- Your Weekly Results Update

Only one of our premium research providers has a team that had high conviction that there'd be no recession in 2023... I.e., they were hugely in the minority, yet they got it right! Recall that, among others, Bloomberg economics gave recession 100% odds last year.

Well, alas, the team (that runs "BCA Global Investment Strategy"), the one that was spot on last year, now sees very high odds of recession come the second half of this year.

Here's a snippet from their Jan 19 piece titled "These Labor Market Indicators Are Pointing To A Hard Landing."

Saturday, January 20, 2024

Economic Update and Stock Market Snapshot: Certain Conditions, and the Technicals, Say Be Very Careful Right Here (video)

Clients, please be sure and take this one in! 😎

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.


Thursday, January 18, 2024

Stocks, Yields, and Dollar Update: Risk Remains Elevated Right Here (video) -- But First, On Certainty

From G. Baid's The Joys of Compounding: The Passionate Pursuit of Lifelong Learning:
"Absolute certainty never exists in the world of finance. Yet, on Wall Street, overconfidence is all-pervasive. Jason Zweig highlights the hubris of investors in his definitions of certainty and uncertainty in his book The Devil's Financial Dictionary:

Morning Note: Yesterday's Log Entry, And the "Finer Aspects" of Value Investing (today's quote)

Keeping this morning's note brief, we'll just consider the message in yesterday's entry to our internal market log:

1/17/2024
There are interesting (and, ultimately, eventual) dynamics possibly taking shape… Which would be the market maybe beginning to sniff out rising recession risk going forward.
This morning, for example, the “hot” retail sales number sent stocks reeling – with tech taking the biggest hit… That makes sense if the market is still on the good-news-is-bad-news (i.e., inspires Fed hawkishness) kick… Thing is, as I type (90 minutes into the session), staples and healthcare are in the green – utilities were as well initially, now modestly lower… That of course flies in the face of the strong-economy (fostered by strong retail sales) narrative that would typically have defensive sectors underperforming.

Wednesday, January 17, 2024

Still Not A Healthy Look for Stocks... Breadth, Yield, and Dollar Headwinds Prevail (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Tuesday, January 16, 2024

Morning Note: A Resonating Quote, New-Year's Breadth (or lack thereof), And Your Weekly Results Update

The title of value investor Gautam Baid's book, The Joys of Compounding: The Passionate Pursuit of Lifelong Learning, has crossed my radar a couple of times lately, in highly-touted fashion -- so I figured I'd give it a read... Having just cracked it over the weekend, I can so far see why it's garnered such attention!  The number of dogeared pages and underlines already in my copy means it'll likely be quoted plenty herein over the next few days.

Having been steeped in markets since 1984, the following, for example, very much resonated with me:   emphasis mine...

Friday, January 12, 2024

Inflation, Consumer Debt, Gold/Copper Ratio Red Flag, and Some Key Company Commentary (video)

Note, at the 3:48 mark, I meant to say "that's how the US can get "government debt" (not inflation) back down below the level of GDP."


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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Thursday, January 11, 2024

CPI Response, And When The Fed Cuts Rates (careful what you ask for) (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Morning Note: CPI, And What's Different As The New Year Gets Underway

Like I said in yesterday's video, the prevailing character of trading would have the market rallying on a cool inflation print, while, conversely, tanking on a hot one.

Well, the December CPI is out, and the read that presumably counts, "core" CPI, which ignores food and energy costs, cooled a tick, at 3.9% for the past year, while matching November with a month-on-month print of 0.3%.

The headline read, which captures food and energy, actually ticked up to 3.4% (from 3.1% in November) year-on-year, and to 0.3% (from 0.1%) month-on-month.

As for the stock market, no big deal -- at least initially.

Tuesday, January 9, 2024

A Weak Weekly Chart, CPI Watch, Apple Risk (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Morning Note: Nvidia Again, Sectors Warn, And Your Weekly Results Update

After a rough start to the year for equities, all it took was an announcement yesterday from last year's AI darling, Nvidia, of "new products" to set tech stocks afire, recapturing a little better than half of last week's losses for the sector.

As for Nvidia's technical setup, yep, that (green circle) is indeed a bullish breakout... Our momentum indicators (bottom 2 panels), however, call its sustainability into serious question:

Saturday, January 6, 2024

Economic Update And A Look At Long-Term Stock Mkt Technicals (video)

I came across the following from premium research firm Variant Perception over the weekend. My personal observations over the past 4 decades has this resonating with me in a big way!

"The consensus view has a tendency to assume existing trends will continue and fail to anticipate the turning point. But that is exactly when you get the maximum disagreement between what people think will happen, and what actually does happen. It is here markets tend to have their most outsized moves, and the ones that are most beneficial for traders and investors to anticipate." 

 

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Friday, January 5, 2024

The Character of a Last Leg Down, And a Quick Look at Stocks, Yields and the Dollar (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Thursday, January 4, 2024

Morning Note: When (if it's going to) Will the Services Sector Follow Manufacturing Into Recession?

While the sentiment among survey respondents wasn't all bad, yesterday's release of the December ISM Manufacturing Index says the US manufacturing sector remains in recession.

Here's from the report:  

Tuesday, January 2, 2024

Market Snapshot: Tough Setup (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

Morning Note: Equity Market Conditions Don't Allow For Adding Risk Right Here

Here's the intro to our latest internal equity market conditions report, along with our US dollar snapshot:

12/31/2023 PWA EQUITY MARKET CONDITIONS INDEX (EMCI): -16.67 (+25 from 11/30/2023)

SP500 Index December 2023, +4.42%:

SP500 Equal Weight Index December 2023, +6.66%:

As we pointed out in November’s report, despite an overall deterioration in conditions, strong seasonality was such that a continuation of the then rally should come as no surprise.