9/3/24
The Market
Technical
The S&P spent the week piddling, though it did
close slightly higher. ‘Soft landing’ remains the accepted narrative in stock
land---which includes a positive bias for equity prices. However, the bond boys
do not agree, which should give us pause. As you know, I usually follow the
bond market when there is disagreement. However, as you also know, my forecast
now is a ‘muddle through’ economy which roughly equates to a ‘soft landing’.
So while the S&P is still short of making a higher
high and has that gap up open down below, short term, I think that the burden
of proof is on the bears to argue that prices aren’t going higher. That said
(longer term), (1) remember the adage ‘sell the first rate cut’, (2) valuations
in total remain high. I remain cautious.
Fading the rally.
https://www.zerohedge.com/markets/fading-rally-hedge-funds-sell-stocks-fastest-pace-march-2022
As I noted above, last week, bond investors took a
slightly less sanguine view of the economy/inflation/interest rates than their equity
counterparts. However, (1) TLT continues to make new higher lows, (2) it trades
above all three DMAs and (3) it remains in a very short term uptrend. So given
that and the latest dovish narrative from the Fed, I think it a bit iffy to
assume that rates are going higher on anything other than a very very short
term timeframe.
On the other hand.
https://www.zerohedge.com/the-market-ear/rates-rise-0
While GLD held above its former all-time high, it
struggled through a flattish week. Part of that lackluster performance can be
attributed, I assume, to the aforementioned disagreement between stock and bond
investors. Given that uncertainty, I sold my GDX position. But remember this
was a trade and if there is a clear resolution to the stock/bond debate in
favor of stocks, I may very well buy it back.
Goldman on gold.
https://www.zerohedge.com/the-market-ear/goldman-going-gold
The dollar managed a rally last week though it
remained in a very short term downtrend. At the moment there is no reason to
assume that downtrend won’t continue. And as I noted previously, if it reaches the
level suggested by that head and shoulders formation, it would retreat to the
December 28 low.
Friday in the charts.
Fundamental
Headlines
The Economy
Week
of review
It was a very upbeat week for US economic data
which included two positive and three neutral primary indicators. (Overseas
stats were evenly balanced.) That clearly supports my ‘muddle through’
scenario---the Street is more affectionately referring to it a ‘soft landing.’ Part and parcel of that outlook is a
declining Fed Funds rate which we will almost certainly see manifest at the
September FOMC meeting. The hope, of course, is that this will help insure the
‘soft landing.’ However, I think that
there remains the risk that the Fed is too late in lowering rates and a
recession is the likely result.
The inflation numbers are included in those
positive stats; and they continue a generally upbeat trend. I think that likely
means that I am going to wrong on my original inflation forecast: ‘inflation is
as good as it is going to get’---at least in the short term. As I noted last
week, M2 growth has been declining which I think means that potentially
inflation has more room to decline.
That said unless and until somebody in Washington
realizes the inflationary implications of the current horrendously irresponsible
fiscal policy, I believe that either the Fed will have to finance that
policy---meaning that higher inflation is an inevitability---or it
won’t---meaning the federal government will suck capital out of the private
sector, stagnating economic growth.
Fiat money is the cause of inflation.
https://www.zerohedge.com/markets/feds-fiat-money-real-cause-price-inflation
Too soon to dismiss inflation.
https://www.zerohedge.com/the-market-ear/too-soon-dismiss-inflation-risk
My forecast remains:
(1) the economy
‘muddles through’ and (2) inflation has likely seen its lows. But my confidence
in that outcome is low.
However, as I have previously noted (1) my original
recession call may turn out to be correct and (2) while I continue to believe
that profligate fiscal policy and an accommodative Fed will ultimately lead to
higher inflation, a recession could work against that scenario in the near
term.
US
International
Other
Fiscal
Policy
Experts
weigh in on Trump/Harris economic proposals.
Harris tax
proposals.
https://scottgrannis.blogspot.com/2024/08/kamalas-tax-proposals-frightening.html
Inflation
Confusion in the numbers.
Recession
We never left the recession of 2020.
More restaurants going into bankruptcy.
Bottom line
Ten stocks the top money managers have been
selling.
https://www.morningstar.com/stocks/10-stocks-best-fund-managers-have-been-selling
The latest from
BofA.
https://www.zerohedge.com/markets/hartnett-commodity-bull-market-just-getting-started
News on Stocks in Our Portfolios
What I am reading today
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