I couldn't agree more with the first line in the following quote.
"Wall Street forecasts what it wants, it doesn't forecast necessarily what's going to happen.
Now, sometimes, what it wants happens and their forecasts are prescient.
What Wall Street wants right now is lower interest rates.
They want lower rates because they see 5% money market rates as competition for the stock market."
--Jim Bianco
Dear Clients, here's a very brief, yet important, assessment to be sure and take in.
Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:
Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:
Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:
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.
Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:
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.”
Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:
Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:
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*:
Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:
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:
Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:
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:
Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:
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:
Clients, here's an important under-the-surface analysis to be sure and take in!
Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:
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.
