11/11/24
The Market
Technical
After a nosedive and a bounce off its 50 DMA in the
prior week, the S&P staged an equally explosive recovery on a huge gap up
open, regaining the uptrend off its August low. The technical question is how is
the Market going to treat this remarkable pin action. Conventional rules point
to a retreat to close that gap up open over the short to intermediate term. However,
given the dramatic political events, conventional rules may not hold.
Seasonal factors suggest an upward bias to the
Market. Plus, the dems initial subdued acceptance of the results allays a host
of concerns I noted in this blog. That said, the stated Trump economic agenda
is not pro-growth, in my opinion; and at some point that will come into play. On
the other hand, if (1) his tariff proposals are more propaganda that reality
and (2) the Musk/Paulson narrative is an indication of a new approach to
government spending, the outlook would not be nearly a dismal as it currently
appears.
That suggests patience as we wait for a new
political/economic agenda to unfold.
However, I think that ultimately a Trump regime,
whatever its final form, will prove more positive for the Market than a Harris
one. Hence, in my opinion, the downside risk to stock prices has been
truncated.
Beyond bullish.
https://www.zerohedge.com/the-market-ear/beyond-bullish-0
Animal spirits are back.
Market Call: Animal Spirits Are Back &
Boosting the Roaring 2020s! Fueling A Meltup Too?
The long bond bounced hard off the lower boundary
of very short term trading range, though it remains in a downtrend and below
all DMAs. Still, it is a hopeful sign that bond investors could be betting that
Trump’s policies will be less severe than his campaign platform. Follow
through.
Treasuries recover post-election losses.
https://www.ft.com/content/d5ea34d4-77ff-49ac-9112-2eca26f86bfa
GLD was down for the second week in a row. But, at
this point, it remains nothing more than a hiccup. Momentum continues to the
upside. That said, the potential now exists that the ‘gold up, interest rates
up, dollar up’ scenario is starting to crack---with the outcome determined by
the yet to be revealed Trump policies both domestic (tariffs, spending, taxes) and
foreign (Ukraine, Israel, China, Iran).
In my previous posts, I have opined: the dollar
continues to shoot the moon---not suggesting but shouting that investors
think that either something enormously positive is occurring or about to occur
in the US or that something enormously negative is occurring or about to occur internationally.
In my opinion, with the election of Trump, the probability
of the latter has declined significantly; and while I think that the Trump
election is much more positive than a Harris one, if he really goes through
with imposing higher tariffs and cutting taxes (in the absence of cutting
spending), then the potential remains for higher inflation, higher interest
rates and a lower dollar.
The dollar likely to strengthen then weaken under
trump.
https://www.ft.com/content/315b4054-136a-4e7e-95fc-f7bd22e03b99
Bottom
line. While the seasonal factor will likely
determine Market direction (up) in the short term, as yet to be announced Trump
policies will be the critical element in deciding the longer term equity
performance. Hence, if you want to trade
the Market move through year end, go for it but I believe that it is too soon
to go all in.
Friday in the charts.
Fundamental
Headlines
The Economy
Week
of review
There weren’t many US economic stats last week. What
we got was negative as were the primary indicators (zero plus, one neutral, one
minus). While those results don’t exactly fit with my ‘muddle through’ scenario
(1) an occasional negative week is to be expected and (2) the dearth of data
lessens their overall significance.
There was no US inflation numbers. So no help on
that score.
Overseas, the stats were overwhelmingly upbeat.
My forecast remains: (1) the economy ‘muddles
through’ and (2) inflation has likely seen its lows.
…. 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.
Of course, the major news event impacting the
economy was the elections.
The good news is that my concerns about possible
civil disruptions did not materialize. The bad news is that if Trump pursues
his campaign promises of cutting taxes and imposing higher tariffs, inflation
and interest rates are likely to move higher and economic growth lower. However,
I do see a glimmer of hope provided by the recent comments of Elon Musk and
John Paulson (both of whom appear to be candidates for positions in the Trump
administration) who hinted at aggressively attacking government spending. That
could be a game changer.
US
International
Other
Latest Q4 nowcast.
https://www.calculatedriskblog.com/2024/11/q4-gdp-tracking-mid-2-range.html
Mortgage delinquencies decreased slightly in
Q3.
https://www.calculatedriskblog.com/2024/11/mba-mortgage-delinquencies-decreased.html
China unveils package to shore up economy.
https://www.ft.com/content/b2feba22-5064-4eb1-84b1-3003cac36def
Monetary Policy
The
Fed’s balance sheet continues to shrink.
Fiscal Policy
What
a second Trump term would mean for your money.
https://www.nytimes.com/2024/11/08/business/trump-taxes-medicare-student-loans.html
Tariffs
The
case for Trump’s tariffs.
Bottom line.
The Trump Market.
Part 2.
https://www.zerohedge.com/markets/trump-presidency-quick-thoughts-market-impact
The latest from BofA.
https://www.zerohedge.com/markets/hartnett-trump-20
A boost for stocks.
https://www.advisorperspectives.com/commentaries/2024/11/08/win-republicans-boosts-us-stocks
News on Stocks in Our Portfolios
EOG Resources (NYSE:EOG) declares $0.975/share
quarterly dividend, 7.1%
increase from prior dividend of $0.910.
What I am reading today
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