The Morning Call
9/18/23
We are babysitting our granddaughter for the next two weeks which
entails me getting her to school by 8AM which means I either send out the days’
Morning Call the night before or after the Market opens or get up at 5AM to get
it out before the Market opens. My choice is door #1.
The
Market
Technical
Confused yet? No? Well,
I am. Last week, the S&P reversed itself back and forth across its 50 DMA
three times, in the process setting a fourth higher low, then closing below it the
very next day. On the fundamental side, the narrative went from ‘inflation in
the rear-view mirror/Fed easing to avoid recession’ to ‘stagflation’ in the
face of contradictory data on both accounts. Clearly, investors are having a
tough time interpreting the numbers; and I can’t fault them for that.
Nonetheless, on a
slightly longer-term basis, the S&P remains well above its 100 and 200 DMAs
and within a short-term uptrend. Until it successfully challenges these longer-term
support levels, the assumption is that the bias is to the upside. That said, the
aforementioned uncertainty regarding a whole host of economic/political issues is
elevated. So, I am not sure how much room to rally there is.
Inflow mania.
https://www.zerohedge.com/the-market-ear/inflow-mania
TLT had another
down week, and its chart remains the ugliest of the group on a long-term basis.
I have pointed out several times that the long Treasury is near a twenty-year
low. As a contrary opinionist, that holds some appeal to me, which, if you
remember, I acted on a couple of weeks ago, buying a small position.
GLD finished flat
on the week, though it didn’t escape the volatility experienced by stocks and
bonds. It managed to (1) create both a gap up and a gap down open, (2) reset
its 50 DMA to resistance but (3) then couldn’t confirm a challenge of its
200DMA---which simply adds to the overall uncertainty among investors.
The dollar continued its two-month sizz to the
upside. But, as you can see, it is approaching the upper boundary of its short-term
uptrend which should slow its rate of advance. Let’s see how it handles that
resistance. I remind you that usually a strong dollar is not a plus for stocks.
Friday in the
charts.
https://www.zerohedge.com/markets/crude-pumped-10-mth-high-stagflation-scares-slam-stocks-bonds
Fundamental
Headlines
The
Economy
Last Week Review
It
was another relatively slow week for US data. What there was, was balanced, as
were the primary indicators (one, one and one). This keeps the lack of a trend
in place. We need follow through to establish a trend and dispel the current
uncertainty overhanging the economy/Market. Unfortunately, we simply don’t have
that right now. In short, the issues of whether or not (1) inflation is in the rear-view
mirror and (2) we will get a ‘soft’ landing are not settled.
As if to put a finer point on that notion, the Market action on last
Thursday suggested that investors had decided that inflation (and hence the
necessity of a tight Fed) is indeed in the rear-view mirror and that the Fed
will start to ease on its tight monetary policy, avoiding a recession. Then,
just as suddenly, on Friday, the Market narrative did a 180 with ‘stagflation’
becoming the headline theme.
With such wild swings in sentiment, especially absent any defining
economic data, ‘follow through’ becomes an extremely important aspect of
investment strategy. Invest accordingly.
This
analyst anticipates a Goldilocks follow through.
This
analyst, not so much.
For
the moment, I am sticking with my recession forecast. My conviction remains
weak and last week didn’t help. I am also maintaining my position that the Fed loosens
at the first sign of trouble.
https://www.advisorperspectives.com/commentaries/2023/09/15/fed-cut-rates-2024-jared-dillian
More.
Longer term, irrespective of how low inflation goes in the short term,
irrespective of whether or not we have a recession and if so, how deep it will
be, we are still faced with an economy growing at well below its historic
secular rate and a base rate of inflation above 2%.
Correcting those self-inflicted wounds won’t be easy. It will take years
of fiscal and monetary restraint to do so. And that would mean less fiscal
stimulus and interest rates staying higher for longer than many now expect---which
unfortunately is not apt to happen.
Bond Vigilantes And The Waiting For Gadot - RIA
(realinvestmentadvice.com)
The
Economy
US
International
Other
Update on big four economic
indicators.
The latest Q3 nowcasts.
https://www.calculatedriskblog.com/2023/09/q3-gdp-tracking-around-3.html
China
China’s
economy is starting to show signs of stability.
Bottom line
P/E ratios are a rising concern.
P/E
Ratios Are A "Rising" Concern - RIA (realinvestmentadvice.com)
News on Stocks in Our Portfolios
What
I am reading today
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