The Morning Call
1/20/26
The
Market
Technical
The S&P remained above its former all-time
high, though just barely. As I noted last week, while I am counting the latest
move up as a breakout, given the index’s weak follow through, I am hesitant to
be bullish. I am also hesitant to get bearish with the S&P above all three
DMAs and in uptrends across all time frames. The best case is that we are in a period
of digestion. But until I see a strong buying impulse, I remain of the opinion
that this is a Market to be traded not invested in---and I am sticking to it
until there is some follow through (in either direction).
Little for bears
to enjoy.
https://talkmarkets.com/content/us-markets/little-for-the-bears-to-enjoy?post=550671
Five excellent charts from Barry Ritholtz.
https://ritholtz.com/2026/01/bubble-myths/
Risk on reflation
trade is back on.
https://www.zerohedge.com/the-market-ear/risk-reflation-trade-back
Calm
is crowded.
https://www.zerohedge.com/the-market-ear/calm-crowded-contrarian-sell-flashes-red
Vol is dead.
https://www.zerohedge.com/the-market-ear/vol-dead-and-thats-opportunity
Everyone is long, volatility is waking up.
https://www.zerohedge.com/the-market-ear/everyones-long-charts-are-rolling-vol-waking
Options markets indicating traders bracing for downside.
https://www.zerohedge.com/markets/options-markets-signal-traders-brace-downside-face-markets-climb
Despite all the
happy talk about lower rates/inflation, bond investors don’t seem to be buying
it. Last week, the long bond challenged both its 50 and 200 DMAs and failed on
both accounts. So, it remains below all three DMAs and in downtrends across all
timeframes. I continue to believe that the only circumstance I can see pushing
rates meaningfully lower would be a recession.
30 Year Japanese treasuries
in full panic mode.
https://www.zerohedge.com/the-market-ear/30y-jgbs-full-panic-mode-global-spillovers-have-started
While gold was
flat on the week, it did nothing to change its upward trajectory. Like the
S&P, it is above all three DMAs and in uptrends across all timeframes. Unlike
the S&P, it has shown no inclination to slow its upward momentum. I
continue to hold my trading position in GDX. Emphasis on ‘trading’ given its
short term geometric rise.
The dollar continued to the advance off its late December
low, despite the latest dollar unfriendly round of Trump policy initiatives.
Perhaps this a sign that the dollar has seen its lows. Nonetheless, it remains
below all three DMAs. So, until it can garner the strength to push above one or
more of these resistance levels, it will remain an ugly chart.
Friday in the
charts.
https://www.zerohedge.com/markets/stocks-dip-gold-oil-crypto-rip-trump-triggers-chaotic-week
Friday in the technical stats.
https://www.barchart.com/stocks/momentum
https://www.barchart.com/stocks/sectors/rankings
https://www.barchart.com/stocks/signals/new-recommendations
Fundamental
Headlines
The
Economy
The
US stats last week were again mixed, though the primary indicators were again
upbeat (three plus, two neutral, one minus). There were two inflation
datapoints, both neutral. Overseas, the data was positive with two upbeat and
one neutral price indicator.
Nothing in this data set warrants a change in my economic growth forecast
(muddle through) though Trump’s latest barrage of economic edicts (capping
credit card rates, subpoenaing Powell) designed to prove that he is dealing
forcefully with the ‘affordability’ issue have served to only add uncertainty
to this outlook.
My ‘inflation is as good as it is going to
get’ prediction is not quite as solid---with many Street pundits suggesting
otherwise. Although as I noted last week that I have yet to see any solid
data substantially confirming that outlook (lower inflation). On the other hand,
(contrary to Trump’s wishes), recent speeches/comments by individual FOMC
members indicate rising concern about inflation. So, while this seemingly more
cautious approach to inflation lifts my confidence near term in my forecast, if
the Fed really got serious about bringing inflation down, I would clearly have
to revise it. But I will believe it when I see it. Bottom line, I leave the
yellow warning light flashing.
US
International
November UK
average earnings (3 moYoY) rose 4.7% versus expectations of +4.5%.
December EU CPI
was reported at +0.2%, in line; the January economic sentiment index was 40.8
versus 34.0; January construction output fell 0.8% versus +0.9%.
December German
PPI was down 0.2% versus forecasts of up 0.1%; the January economic sentiment index
was 59.6 versus 49.0; the January current conditions index was -72.7 versus -77.0.
Other
An industrial renaissance is here.
https://www.apolloacademy.com/the-industrial-renaissance-is-here/
The
middle class is shrinking because it is moving up.
https://reason.com/2026/01/15/yes-the-middle-class-is-shrinking-because-its-moving-up/
Industrial
production sets new post pandemic high.
https://bonddad.blogspot.com/2026/01/industrial-production-sets-new-post.html
The
week ahead.
ECONOMIC
WEEK AHEAD: January 20–23
Overnight News
Trump threatens 200% champagne tariffs.
Monetary
Policy
The Fed is flawed, politicizing it will make
it worse.
It doesn’t matter who the Fed chair is, the
Fed doesn’t control interest rates.
The debt ‘black hole’ claims another victim.
https://talkmarkets.com/content/us-markets/the-debt-black-hole-claims-another-victim?post=550673
Inflation
Food inflation gets hot.
Tariffs
Trump threatens new tariffs against EU over
Greenland spat.
Investing
DJIA at 36% premium to the dividend discount
model.
The one thing
holding the AI boom back.
Tariffs
and demand for stablecoins.
https://klementoninvesting.substack.com/p/us-tariffs-and-the-demand-for-stablecoins
Pimco
diversifying away from US due to Trump’s erratic policies.
https://www.ft.com/content/9b2f8903-4350-45a5-a915-a58b6f9b35fb
The
latest from BofA.
Highest
expectations in 15 years.
https://www.zerohedge.com/the-market-ear/highest-expectations-15-years
Investor
Alert
In my latest
review on our Universe, Home Depot failed to meet the minimum financial
criteria for inclusion. Accordingly, it is being Removed from the Dividend
Growth Universe and the Dividend Growth Portfolio will Sell its position at today’s
Market open.
News on Stocks in Our Portfolios
Paychex (PAYX) declares $1.08/share quarterly dividend, in line with previous.
Paychex (PAYX) on Friday announced an up to $1B share buyback
program.
Fastenal press
release (FAST): Q4 GAAP EPS of $0.26 in-line.
Revenue of
$2.03B (+11.5% Y/Y) misses by $10M.
Fastenal (FAST) declares $0.24/share quarterly dividend, 9.1%
increase from prior dividend of $0.22.
What
I am reading today
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