The Morning Call
10/16/23
The
Market
Technical
The S&P was
roughly flat on the week. The good news
is that it held above the former lower boundary of its short term uptrend---in
the face of some pretty scary headlines.
The bad news is that it couldn’t push through its 50 DMA. I am still not sure whether or not a bottom
has been made or if the latest bounce is just a bear market rally. So, I am waiting for a more authoritative
follow through before making a call.
Patience is still the word.
A shift in bullish
sentiment.
https://www.bespokepremium.com/interactive/posts/think-big-blog/bulls-pile-back-in
The long Treasury
was up last week. But it likely had less
to do with the economics of interest rates/Fed policy and more to do with the
violence in the Middle East (US Treasuries as a safe haven). Nonetheless, TLT did manage to close above
the former lower boundary of its long term trading range; although it did so on
a gap up open which immediately got filled.
It finished the week below that boundary. As I said above, right now geopolitics has as
much to do with TLT’s price as economics.
As a result, we need to just sit on the sidelines, wait for economics to
regain control of the narrative and then let the pin action tell us its story.
As you can see,
gold had quite the week. But as with the
other indices, its performance was more a function of Middle East violence than
anything economic. You might want to
trade GLD as a hedge against a disaster scenario. But this is one of those bets that requires
you to be very quick on your feet.
Regrettably I am not that quick or smart.
Given the volatility in the other indices, I am
surprised that the dollar didn’t react more forcefully in its capacity as a
safe haven. Aso like the other indices,
its price action was likely all about the threat of increased violence and,
therefore, provides little informational value.
Friday in the
charts.
https://www.zerohedge.com/markets/israel-inflation-spark-big-week-bonds-bullion-black-gold
A case of the
jitters.
https://www.zerohedge.com/the-market-ear/nervous-0
Fundamental
Headlines
The
Economy
Last Week Review
Not
a lot of US data last week, what we got was slightly weighed to the minus side
as were the primary indicators (two negative).
So, the back and forth in the data and its interpretation continues.
Which
means that the bond market’s sudden conviction in the prior week that the Fed
‘higher for longer’ scenario was the operative narrative weakened
considerably. Leaving us back where we
started---unsure of the likelihood that inflation is in the rear view mirror or
whether we get a soft, no or hard landing.
Last
week I suspended my recession forecast (which I held with weak
conviction). Given the erratic data
flow, I see no reason to change that.
But the real outlook is ‘I don’t have a clue’.
Weekly
leading economic index.
I
am leaving my ‘Fed chickens out’ call in place---simply because it always does.
Longer term, we are faced with an economy growing at well below its
historic secular rate and a base rate of inflation above 2%.
Correcting that 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.
The
Economy
US
The October NY Fed manufacturing index was -4.6
versus estimates of -7.
International
August Japanese industrial
production fell 0.7% versus expectations of 0%.
The August EU trade
balance was E6.7 billion versus projections of E12.5 billion.
September German
PPI was +0.2% versus consensus of +0.1%.
Other
Fiscal Policy
The
deficit is bigger than it looks.
Earmarks are back.
https://www.zerohedge.com/political/earmarks-are-back-house-republicans-opened-bar-spendaholics
Inflation
CPI,
ex shelter, is 2%.
https://scottgrannis.blogspot.com/2023/10/cpi-ex-shelter-is-20.htmlnm
YoY measures of inflation.
https://www.calculatedriskblog.com/2023/10/yoy-measures-of-inflation-services.html
Recession
The commercial
real estate crisis is just getting started.
China
China
on the brink of deflation.
Bottom line
The latest from BofA.
https://www.zerohedge.com/markets/michael-hartnetts-favorite-trades-2024-bonds-bullion-and-breadth
Despite losses, investors flock to long bond
ETFs.
https://www.morningstar.com/markets/despite-big-losses-investor-flock-long-term-bond-etfs
News on Stocks in Our Portfolios
Qualcomm (NASDAQ:QCOM) declares $0.80/share quarterly dividend,
in line with previous.
What
I am reading today
The fiercest medieval queens.
Meet
5 of the fiercest queens from medieval times (nationalgeographic.com)
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