The Morning Call
10/23/23
The
Market
Technical
The S&P was
shellacked for the second week in a row.
The main causes remained the same (1) the poor headlines (war,
government disfunction, etc.) and (2) a shift in the operative market narrative
from focusing on Fed policy to the pin action in the long bond. On the latter count, it appears that bond
investors care less about how the Fed manages the short end of the curve and
more about the economic factors playing on the long end, i.e. runaway fiscal
policy.
As to the pin
action itself, the S&P intraweek managed to regain its 200 DMA for a day,
then roll back over again. It also took
out the 23.6% Fibonacci retracement level.
If it remains there through the close today, it will reset both to
resistance. Worse, there is little
visible support until the ~3800 area. If
we get that flush, it will likely be time to buy stocks. Indeed, there are a number of candidates on
my ‘to buy’ list at current price levels.
Update on
sentiment indicators.
https://www.bespokepremium.com/interactive/posts/think-big-blog/new-lows-for-sp-and-sentiment
Is it the bottom?
https://www.zerohedge.com/the-market-ear/bottom-0
While the long Treasury
was flat on the week, there is nothing in this chart to suggest that a bottom
has been made. So the assumption has to
be that it will continue to decline.
Like stocks, there may be a buying opportunity in the near future; but
until TLT stops going down, the sidelines are the best place to be.
The coming
showdown in the bond market.
Jim Grant’s
opinion.
GLD is telling us what
we already know from equities and bonds---the fear trade is on. The only questions are how far and how long. Part of the answer lies in geopolitics, part
of it in inflation fears and part of it in how gold handles its all-time
high---which it is a short hair away from.
The first two are unknowns, the latter can be easily monitored. So that is where I have my attention.
Like every other index, the dollar is reflecting fear. I doubt anything will change until the
geopolitical and economic issues are resolved.
Friday in the
charts.
https://www.zerohedge.com/markets/yields-slump-stocks-dump-cryptos-jump-usa-sovereign-risk-surges
Possibilities
versus probabilities.
Possibilities
Versus Probabilities - RIA (realinvestmentadvice.com)
Fundamental
Headlines
The
Economy
Last Week Review
US data
last week was a repeat of the prior week: very upbeat as were the primary
indicators (three positive, one neutral, one negative). This is the first time I can’t remember when
we have had two solid up weeks in a row.
That is hardly a trend; but all trends have to start somewhere and this could
represent a good beginning. However, for
the time being, the uncertainty remains as to the likelihood that inflation is
in the rear view mirror or whether we get a soft, no or hard landing.
That
said, the generally accepted economic scenario is a bit more pessimistic with
the bond market in apparent control of the headlines---its narrative being that
inflation has not been licked but the driving force is not easy monetary policy
but a profligate fiscal policy.
Regrettably, a change in the trend of government spending is much less likely
in the short run than a switch in Fed policy.
Bottom
line: As you know, I have suspended my recession forecast. Given the recent trend in the data flow, I
see no reason to change that. But the
real outlook is ‘I don’t have a clue’.
Recession
alert weekly leading economic index.
Big
four recession indicators.
An
initial look at economic growth in Q4.
https://www.capitalspectator.com/early-q4-us-gdp-guesstimate-points-to-sharp-economic-slowdown/
Economists
say there is no recession. But are they
right?
Economists
No Longer Expect A Recession. Are They Right? - RIA (realinvestmentadvice.com)
I
am leaving my ‘Fed chickens out’ call in place---simply because it always does
and it may be doing so now.
Economic
data likely to keep Fed rate hikes on pause.
Massive
deposit outflow from banks last week.
https://www.zerohedge.com/markets/fed-admits-banks-suffered-massive-deposit-outflow-last-week
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
International
Q3 German GDP growth was -0.1% versus
estimates of -0.3%.
The October EU economic sentiment index was
93.3 versus expectations of 93.0; the industrial sentiment index was -9.3
versus -9.5; the services sentiment index was +4.5 versus +3.4; consumer confidence
was -17.9, in line.
Other
The coronavirus
The veil of silence over excess covid deaths.
https://brownstone.org/articles/veil-of-silence-over-excess-deaths/
Bottom
line.
For the bears.
News on Stocks in Our Portfolios
McDonald press release (NYSE:MCD): Q3 Non-GAAP EPS of $3.19 beats by $0.20.
Revenue
of $6.69B (+14.0% Y/Y) beats by $140M (11% in constant currencies).
What
I am reading today
The latest on global warming.
https://issuesinsights.com/2023/10/25/the-latest-on-global-warming-is-there-is-no-global-warming/
The Mediterranean diet really is
good for you.
https://www.nytimes.com/2023/01/06/well/eat/mediterranean-diet-health.html
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