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,

Morning Note: Mixed-Bag Earnings Commentary, Again on "Soft Landings" -- And -- Your Weekly Results Update (And 2 Must-Read, Timely, Quotes!)

Here's another round of earnings call highlights... Color-coding reflects our view of the economic implications therein:

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.

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.

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

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."

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.

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.

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.

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...

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.

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.

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:

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.

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.

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:  

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.