Old "Rules" Don't Apply!

Well, I'm already breaking my own new rule, by publishing two blog posts on the same day... Can't resist it this morning... I.e., I don't want this one to get lost in the shuffle of next week's summary.

This morning's log entry:

4/27/2024

This from Grant Williams' podcast guest is, in essence, what I’ve been describing during client review meetings of late…

I.e., In terms of what he says about how policy will be implemented going forward, I couldn’t agree more!

Emphasis mine:

GDP, Consumer Confidence, Commodities, Stocks, Yields, the Dollar, Gold and Earnings Call Comments (video)

I somehow failed to mention the market implications of next week's treasury quarterly refunding announcement... Before you click the play button, here’s from our internal notes: 

4/23/2024 

Next week’s QRA (the treasury’s quarterly refunding announcement) is likely to be big for markets. 

If Yellen wants to concentrate go-forward issuance on the short end of the curve, that’s easy for the market to absorb and bullish for equities. 

If, on the other hand, she signals that issuance will concentrate on the long-end (far more difficult for the market to absorb (i.e., yields higher), that’s bearish. 

With regard to the TGA (treasury general account), if she sets a high target (i.e., much bond issuance proceeds get stuck in the TGA, as opposed to being spent in the economy), that’s bearish. 

If she sets a relatively low target (i.e., more juice going into the economy), that’s bullish. 

Her track record thus far – not to mention, incentives – leans heavily toward t-bill concentration and a lowish TGA target (i.e., she definitely wants to keep financial markets buoyant going forward)... Problem being, that would be economically-stimulative, which might problematically offset what would otherwise be hugely bullish (operative word their being “might”) for equities... I.e., a resilient economy means sticky inflation, and sticky inflation means no aggressive rate cutting over the next few months, which could be a real downer for equities going forward. 

Nevertheless, if we're talking relatively light issuance (less than last quarter) focused on the short-end of the curve, and, again, a lowish TGA target, stocks are likely to, at least initially, rally on the news.

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:

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.

Key Highlights: Beige Book Caution, A Manufacturing Head Fake (maybe), Overbought Commodities, and A Potentially Waning Consumer

Here are the latest highlights of key global economic and market signals, trends, etc., from our internal log... Be sure and peruse all the way to the end, as we highlight a broad range of topics.

4/19/2024

Equity futures, bonds, currencies, commodities all reacted aggressively to the initial news of Israel’s attack on a military base in Iran… As the dust settled it became clear that the attack was limited in scope – i.e., tit for tat – and, therefore, for the moment, not a market event… As I type, 7:04am, the S&P is flat, the Nasdaq’s off 56 bps, yields are down a bit, gold’s up 25 bps, the dollar’s down 21 bps and oil’s flat.

4/19/2024

The latest Fed Beige Book release (a view from each of the 12 districts) points to an economy that continues to expand, albeit at a snail's pace at this point, and a consumer who is, on balance, becoming more cautious on spending… Inflation signals are mixed, but, on balance, somewhat problematic for businesses as their pricing power now seems to be fleeting.

Economic Update: Mixed Data, Earnings Call Comments, Stocks, Yields, the Dollar, and Atypical Gold (video)

 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:

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.

Macro Highlights: Is Inflation and Employment Peaking?, Mixed Retail Sales Results, Hot Cocoa, And An "Income-Driven Expansion"

Here's a summation of the key global economic and market signals, trends, etc., that we touched on in our internal log in recent days... Be sure and peruse all the way to the end, as we highlight a broad range of topics.

4/18/2024

Yesterday saw a rebound in our commodity-oriented, non-US equity and fixed income positions, essentially resulting in a resumption of the recent trend where our core allocation notably outperforms the broad US equity averages. That said, and to be clear, this week’s comments in that regard should not be taken as me suggesting that equities are a benchmark that we strive to match or beat, they’re not, it’s simply an observation, given that our industry indeed scores itself relative to equity markets, which, in my view, is a potentially dangerous distraction from the task of responsibly managing (and risk-managing) client portfolios.

Economic Update (video)

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:

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.

Macro Highlights

Dear Clients, per my last note, you'll be receiving fewer blog notifications going forward, as we're now summarizing for you the key global economic and market signals, trends, etc., that we record in our internal log each week... Be sure and peruse all the way to the end, as we highlight a broad range of topics.

As this week comes to a close, the world is on heightened alert over concerning signals that an attack on Israel by Iran is imminent. 

Resulting in stocks down, oil, gold and bonds up in early Friday trading.

Here are some key bullet points from this week's log (clarification added parenthetically):      Have a nice weekend!

Changing Up The Blog A Bit

Dear Readers,

You'll be receiving fewer blog notifications going forward, as we've decided to forego sending out a daily note. Instead we'll be offering up a concise weekly summation of the thoughts and the data we compile each day in our internal macro log. Along with the usual video report on our findings from the weekly scoring of the PWA Index -- where we'll throw in some commentary on the weekly scoring of our financial stress and sentiment indices as well.

The technical market updates will continue, but, to avoid redundancy, I'll produce those only when there's a notable change in the technical setup across equities, yields, the dollar, etc.

Plus, we'll continue to summarize for you the results of the monthly scoring of our equity market conditions index as well.

The goal here is to be less piecemeal, and, thus, to provide a more accessible and succinct accounting of what our work says about the ongoing state of general investment conditions.

Your feedback of course is always welcome.

Thanks so much,
Marty

Economic Update: Hot Jobs Number And Strong Equity Market Reaction, What Gives? (video)

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:

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.

More on Sentiment, Valuations, the Technicals, and What Will Move Stocks Big (Up or Down) In the Short Run (video)

Dear Clients, here's yet another important one to 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:

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.

Key Highlights

 Key highlights from our latest messaging herein:

Yesterday:

Stocks continued to advance over the past month, despite the notable headwinds outlined in our February report.

While sector leadership remains bullish – and breadth has improved notably – valuation, sentiment and the technicals, in particular, continue to reflect significant downside risk going forward.

Bottom line: Per the above, and the entirety of this report, current overall conditions leave us uninspired to add measurable equity market risk, or to hedge less, at this juncture.

Equity Market Conditions Update

While, per the below, the monthly scoring of our own "Equity Market Conditions Index" (EMCI) denotes improvement in the overall setup, general conditions remain stressed to the point that demands that we remain very diversified, liquid, and continue to hedge against something potentially consequential to the downside -- while maintaining sufficient exposure to responsibly participate in the current uptrend.

The following captures the intro to our internal report, and, to follow up on yesterday's message, features the inputs to our assessment of valuations. We also featured the section on economic conditions, which we considered upgrading to neutral, although, as you'll see in the brief narrative, wasn't justified just yet.

Have a great day!

Euphoria Has Set In, And Your Weekly Results Update

I mentioned in a recent video commentary that we are probably spending more time of late assessing narratives that don't jibe with our present view of general conditions, versus those that do -- as open-mindedness and objectivity are absolute musts for us... Well, I'm definitely not doing that in this post when it comes to the present risk/reward setup for US stocks.

Those of you who've been taking in our latest messaging will find the following very familiar... I.e., Peter Boockvar shares our present concerns: