The Morning Call
6/15/23
The
Market
Technical
Wednesday
in the charts.
https://www.zerohedge.com/markets/dont-call-it-skip-fed-pause-prompts-wild-swings-across-all-assets
Note: at the close yesterday, the S&P confirmed
the challenge of its short-term trading range and reset to an uptrend---which positions
it for a run to its all-time high (~4818).
I think that the fundamentals argue against it reaching that level (see
below); but for those nimble enough (I am not), there is likely room for a trade.
Consumer sentiment
is low and that’s good for stocks.
https://www.morningstar.com/stocks/consumer-sentiment-is-lowthats-good-sign-stocks
The seasonality of returns.
https://global-macro-monitor.com/2023/06/12/seasonal-greetings-sell-monday-buy-thursday/
Fundamental
Headlines
The
Economy
US
Weekly initial jobless claims totaled 262,000
versus estimates of 249,000.
May retail sales
rose 0.3% versus predictions of -0.1%; ex autos, they were up 0.1%, in line.
The June Philadelphia
Fed manufacturing index came in at -13.7 versus consensus of -14.0; the June NY
Fed manufacturing index was +6.6 versus -15.1.
International
April Japanese machinery
orders were up 5.5% versus expectations of +3.0%; the May trade balance weas
Y-1372.5 billion versus Y-1331.9 billion.
The April EU trade
balance was E-11.7 billion versus projections of E+21.5 billion.
May Chinese YoY
industrial production was up 3.5% versus forecasts of +3.6%; May YoY fixed
investment was +4.0% versus +4.4%; May YoY retail sales were up 12.7% versus
+13.6%.
Other
The
Fed
The FOMC left
rates unchanged (not a surprise) but the accompanying ‘dot plot’ pointed to at
least two more rate hikes this year (a big surprise). Characterized by the Street as a ‘hawkish’
pause---which, as an aside, contrasts with the outcome of the last FOMC meeting
in which it raised rates but crawfished on future action (characterized as a ‘dovish’
hike).
https://www.zerohedge.com/markets/fomc-8
Lost in this mishmash
of Fed speak lingo is any mention of money supply (Powell did briefly allude to
the Fed continuing to shrink its balance sheet). However, I believe as Milton Freidman did
that inflation is a function of too much money chasing too few goods. Remember
QE was not only low rates but also a vastly expanded money supply. While the former certainly contributed to the
mispricing of risk and made easy profligate government spending at a low price (interest
rate), the latter provided the fuel. So,
I believe that if the money supply is shrinking and continues to do so, inflation will subside whatever
the interest rate. In short, the focus
of higher rates containing inflation is a circle jerk.
Unfortunately, a
declining money supply also means that the odds of recession are rising. To be
sure, tight money will bring down both economic growth and inflation. But the Fed is failing to link its desire to
stem inflation to money supply growth. In
other words, everyone is fretting over whether there will or won’t be more rate
hikes when they should be focused on what the Fed is doing with the money
supply.
Bottom line: watch
M2. If it continues to decline both
inflation and economic growth are coming down.
A different perspective.
https://www.zerohedge.com/markets/central-banks-step-back-inflation-steps
The ECB raises interest rates and suspends
asset purchase programs.
Recession
Update on US China trade.
https://politicalcalculations.blogspot.com/2023/06/troubling-developments-come-to-fore-in.html
News on Stocks in Our Portfolios
Kroger press release (NYSE:KR): Q1 Non-GAAP EPS of $1.51 beats by $0.06.
Revenue
of $45.16B (+1.3% Y/Y) misses by $70M.
What
I am reading today
GDP
and temperature shocks.
https://marginalrevolution.com/marginalrevolution/2023/06/gdp-and-temperature-shocks.html
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