YOUR QUIVER | March 7, 2023
Today's Rundown
CIO | Nadine Terman @SolsteinCapital details what she's seeing in global financial markets.
Showtime
Investors will be scrutinizing Powell’s testimony to Congress for hints on any updated economic outlook or rate path. Certainly, he’ll be discussing inflation, labor strength, growth, and everything else that is keeping investors on edge. If he coos like a dove at all, expect total reversal of shorts on short-term UST. But given the resiliency of various data points, we may get a hawkish policy that would spook investors due to a potential policy mistake of overtightening. We’ve been watching Fed’s policy impact on a lag. Housing markets are weaker. Corporate cash flows are weaker. The consumer looks a bit shakier, etc.
Various Levels to Watch
The 10 yr UST yield at 4%. The 2 yr UST yield at 5%. WTI vs its 100 DMA.
Manufacturing Ideas
The US’ manufacturing sector is still in contraction, per the Jan Durable Goods New Orders (-5.7% 3mo annualized) and January Factory Orders (-7.5% 3mo SAAR) data. Because the US isn’t a big manufacturing-based economy anymore, you don’t see this having the same impact to fuel recessions overall.
Around the World
Asian equities closed mostly lower. Greater China markets were lower post-release of Chinese trade data for January and February. Japan's Nikkei was up, and the Topix closed at a 15-mo high. Australia and Taiwan were up, yet Korea was flat. EZ indexes are mixed.
A New Sheriff
China announced a new financial regulator that will oversee all financial categories except securities, which will bring existing banking and insurance regulators in house. The securities regulator will become a gov agency under the State Council.
Missing Money
An account holder of Coinbase is suing after a security breach enabled the disappearance of his life savings. He received a text from his mobile carrier noting a SIM card change request he had not made. When he got a new card and turned on the service, his Coinbase account was drained.
Friday and Next Tuesday + Friday
On Friday we get Jobs. Next Tues we’ll get CPI. A week from Friday we have triple witching. So put those dates on your calendar. As UBS points out, options participants stuck with a short gamma exposure might have to edit their risk toward a delta neutral position, which typically requires them to transact in the direction of the underlying momentum. In addition, a rolling of the E-Mini security to the next quarterly contract often moves traders to the sidelines until the new security creates its own technical history. If a sustainable compression of volatility has to happen for a grinding rally to occur, then portfolio managers may be forced to have at least a bit of patience before benefitting from any steady ascent.
Debt Ceiling
Remember that pesky challenge that still exists? Don’t get caught flat-footed…it seems that everyone expects a deal to happen.
The EV Charge
Per Nikkei, Tokyo wants 150x as many chargers at apartments by 2030.
Wilson's Worry
MS’s Michael Wilson says he still is expecting -20% downside on some big tech and meme stocks. He didn’t give names but also said that some could go bankrupt. That’s some cheer with your oatmeal. He’s worried about a lack of cashflow, even if earnings look ok. Because he thinks earnings will get hit hard, he doesn’t think investors will look through any cashflow slowdown (or disappearance) in the short-term.
