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."

"Investors have taken comfort in the fact that unemployment has remained low in all the major economies. But underneath the surface, there are clear signs that labor demand is weakening.
In the US, job openings, the quits rate, and the hiring rate are all falling. Temporary employment is dropping while the average number of hours worked per week is trending lower.
Outside the US, job vacancies are declining, and business surveys suggest that a growing number of firms intend to cut jobs.
Although it is still possible that labor demand will reaccelerate, the more likely outcome is a global recession starting in the second half of 2024." 

Per this weekend's economic update, we share their concerns... Here it is again, in case you missed it: 

And here's your weekly, Sector, Region and Asset Class Results Update:

Asian equities leaned red overnight, with 9 of the 16 markets we track closing lower.

Europe mostly green so far this morning, with 17 of the 19 bourses we follow trading up as I type.

US equity averages are up to start the session: Dow by 192 points (0.50%), SP500 up 0.50%, SP500 Equal Weight up 0.72%, Nasdaq 100 up 0.53%, Nasdaq Comp up 0.64%, Russell 2000 up 1.68%.

This morning the VIX sits at 13.61.

Oil futures are up 1.31%, nat gas futures are down 5.20%, gold's down 0.34%, silver's down 2.23%, copper futures are down 0.60% and the ag complex (DBA) is down 0.05%.

The 10-year treasury is up (yield down) and the dollar is down 0.07%.

Among our 32 core positions (excluding options hedges, cash and money market funds), 22 -- led by Dutch Bros, XLRE (REITs), XLC (communication stocks), TLT (long-term treasuries) and XLI (industrial stocks) -- are in the green so far this morning... The losers are being led lower by REMX (rare earth miners), SLV (silver), URNM (uranium miners), VWO (emerging mkt equities) and Range Resources.

While, per the above, recession odds remain too high for comfort, the risk of another meaningful leg lower in equities is, therefore, too high for comfort as well... Thus, we need to keep the following -- particularly with regard to the tech sector -- in mind:
"New trends always emerge during a bear market -- that's the period during which most investors are either waiting for their purchase price or are busy committing fresh sins by averaging the winning leader stocks bought during the previous bull market. (The number of retail investors in a sector tends to go up during its bullish phase, so, during the subsequent bear market for the sector, relentless selling occurs at every higher level, as old investors try their best to exit and rid themselves of bad memories.)"

--Gautam Baid: The Joys of Compounding

Have a great day!

No comments:

Post a Comment