12/9/24
The Market
Technical
The S&P maintained its upward momentum. While
it has not filled the huge gap up open of 11/6 (a negative), it still has a
number of pluses going for it: (1) seasonally, it a positive time of the year,
(2) with Trump’s appointments, the long term economic outlook is improving [deregulation
and lower spending], (3) there has been few post-election disturbances.
So, my conclusion remains ‘the downside risk
to stock prices has been truncated.’
That said, it is early to be getting too
jiggy with a possible improving economic outlook. So, patience is still in
order---unless any purchases are strictly for a trade.
Last week, I linked to a number of articles outlining
(in the authors’ opinions) the extent of current equity overvaluation. Of
course, (1) stocks can always become more overvalued; and given the favorable technical
picture, they probably will and (2) there are a number of stocks that are currently
within my Buy Value Range. But I think that today discretion is the better part
of valor and that the best strategy is to await a sell off to make any
purchases. I am also looking to reduce any holdings that are at or near their Sell
Half range.
The long bond continued its moon shot from the
prior week. I noted in last week’s Monday Morning Chartology that there were
multiple gap up and gap down opens which makes offering an opinion on the short
term direction of TLT a bit difficult. However, from the long term point of
view, the trend remains solidly to the downside; and with growing evidence that
inflation either is or may soon be on the rebound, I see no reason to assume a
reversal of that trend.
And when the credit spreads start to widen, watch
out.
I suggested in last week’s Monday Morning
Chartology that if gold makes another lower high, it will have
built a head and shoulders top. Well, it did; and that raises the caution
flag. So if you own GLD, consider lightening up on your position.
From last week: The dollar staged its first
serious selloff since its 9/30 low, making two gap down opens, threatening to
end its rapid climb since that 9/30 low and failing to successfully challenge the
upper boundary of its short term trading range. Of course, give the steepness
of its recent rise, some digestion process is to be expected. Let’s see where
it finds support before making judgement about trend.
It didn’t find support. On the other hand, this
retreat is still well within the bounds of a ‘digestion process.’ Plus with the Street rattling on about ‘American
exceptionalism’, any significant decline from here doesn’t seem likely.
Friday in the charts.
https://www.zerohedge.com/market-recaps/big-tech-bitcoin-bonds-bid-bad-data-rate-cut-odds-surge-week
Fundamental
Headlines
The Economy
Week
of review
Last week’s US economic stats were evenly matched as
were the primary indicators (one plus, zero neutral, one minus)---a perfect
reading for my ‘muddle through’ scenario.
Overseas, the numbers were also balanced which is welcome
respite from the developing trend of downward momentum. Let’s hope conditions continue
to improve, though the political headlines coming out of France and Germany
suggest otherwise.
The only price data was EU PPI which contained both
positive and negative factors. However, that doesn’t lessen my concern that
higher inflation is in our future, exacerbated by all the talk of tariffs and
tax cuts. To be sure, the cost cutting
proposals could be an offset but (1) Trump has the power to impose tariffs
unilaterally, and (2) it is a lot easier to get congress to cut taxes than it
is to cut spending.
Bottom line: my forecast remains: (1) the economy
‘muddles through’ and (2) inflation has likely seen its lows. But the level of
economic uncertainty is higher than normal, at least in the short term, and all
economic forecasts (including my own) should be viewed accordingly.
US
International
Other
A deep dive into the November jobs report.
https://bonddad.blogspot.com/2024/12/november-jobs-report-expected-monthly.html
Monetary Policy
The
Fed continues to shrink its balance sheet.
Investing
Crypto is here to stay.
The outperformance of growth over value and
dividends.
https://www.bespokepremium.com/interactive/posts/think-big-blog/growth-value-and-dividends
Update on valuations.
News on Stocks in Our Portfolios
What I am reading today
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