Thursday, December 15, 2022

The Morning Call---Nobody believes the Fed

 

The Morning Call

 

12/15/22

 

The Market

         

    Technical

 

            Wednesday in the charts.

            https://www.zerohedge.com/markets/markets-swing-wildly-hawkish-powell-pummels-pause-narrative-then-opens-door

 

Note: the S&P tried again to challenge its 200 DMA and failed.  At the moment, it doesn’t look to good for the Santa Claus rally.

 

            What if Santa Claus doesn’t show?

            https://allstarcharts.com/this-years-santa-claus-rally/

 

            Even if he does, don’t expect anything big.

            https://www.zerohedge.com/the-market-ear/dont-expect-anything-big-even-if-he-shows

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

                       

              Weekly initial jobless claims totaled 211,000 versus   expectations of

               230,000.

 

                          November industrial production declined 0.2% versus estimates of +0.1%.

 

November retail sales were down 0.6% versus predictions of +0.1%; ex   autos they were down 0.2%, in line.

                       

 The December Philadelphia Fed manufacturing index was -13.8 versus     consensus of -10.0.

 

December New York Fed manufacturing index was -11.2 versus forecasts of -1.0.

 

                        International

 

The November Japanese trade balance was Y-2027 billion versus projections of Y-1680.

 

The November YoY Chinese industrial production was up 2.2% versus expectations of +3.6%; retail sales were down 5.9% versus -3.7%; fixed asset investments were +5.3% versus +5.6%; the unemployment rate was 5.7% versus 5.5%.

 

November German PPI was -0.9% versus estimates of -0.8%.

 

                        Other

 

                          US imports form China continue to plummet.

                          https://politicalcalculations.blogspot.com/2022/12/us-imports-from-china-continue.html#.Y5obOHbMKUk

 

On the other hand, the US just added 30 Chinese companies to its trade backlist.

https://www.bloomberg.com/news/articles/2022-12-14/us-to-add-more-than-30-chinese-companies-to-trade-blacklist?srnd=premium&sref=loFkkPMQ

 

            The Fed

 

The FOMC wrapped up its December meeting yesterday.  It raised the Fed Funds rate another 50 basis points.  More importantly, its dot plot suggested further increases to levels slightly higher than the previous dot plot.  It also showed slightly slower economic growth and slightly higher unemployment.  Here is the summary statement.

              https://www.calculatedriskblog.com/2022/12/fomc-statement-raise-rates-50-bp.html

 

              Here is the dot plot.

              https://www.calculatedriskblog.com/2022/12/fomc-projections-and-press-conference.html

 

In Powell’s press conference, he emphasized that (1) policy will likely to stay tighter for longer, but (2) the pace of rate increases is slowing as part of its attempt to avoid staying too tight for too long, (3) the economy will experience a sustained period of below average economic growth and (4) [drumroll, please] the Fed is not backing off its 2% inflation target [though given the pin action in the fixed income market, apparently the bond boys either believe that he left the door open for a higher base inflation rate, i.e., 3 or 4% or they just don’t believe his hawkish narrative].

 

In sum, a more hawkish tone than many expected but plenty of skeptics remain.  Confused?  Join the crowd.

 

ECB raises rates and starts QT.

https://www.zerohedge.com/markets/hawkish-ecb-hikes-50bps-will-begin-qt-march-raises-inflation-expectations

 

Earlier this month, I linked to several articles discussing a BIS study that expressed concern about the growing global off-balance sheet derivatives volume---which has reached $80 trillion.  This article   attempts to shed some light on the subject.

https://www.ft.com/content/536eaa84-ef39-4a1a-acad-75fe9179e7ab

 

            Fiscal policy

 

              More mischief from our ruling class.

              https://www.project-syndicate.org/commentary/inflation-reduction-act-european-criticism-wto-rules-by-daniel-gros-2022-12

 

     Bottom line

 

            Where the returns have been in 2022.

            https://www.capitalspectator.com/dividend-yield-is-2022s-upside-outlier-for-equity-factor-returns/

 

    News on Stocks in Our Portfolios

 

 

 

What I am reading today

 

           

 

 

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