YOUR QUIVER | January 27, 2023
Today's Rundown
CIO | Nadine Terman @SolsteinCapital details what she's seeing in global financial markets.
Wide and Narrow
Trading session ranges mostly have waffled between fairly narrow and extremely wide. So, anyone trying to make sense of trends is stuck pontificating about by a few extremely anticipated news items. Not a huge confidence builder to sustain rallies on. Next up are (i) the Fed’s hike and comments and (ii) next Friday’s Jobs Report, but then we’ll have a few weeks when earnings will take center stage before we see Feb macro figures in early March. But the Fed had better be at 25 bps next week, because expectations are firmly at that level.
T+2
We’re at the T+2 settlement day for Jan, so any calendar-driven trades (e.g., rebalancing) is starting today.
Yesterday's Action
In the US, it was led by energy and tech. The S&P hit 4075, above major daily and weekly moving ave. If it closes above 4025, it will mark the 1st weekly close above the 200-weekly moving ave since the end of Nov. The VIX fell below 19.00, so we are getting to the complacent zone.
Double Bananas
Agree with 42Macro on this one. Within the PCE takeaways, Nominal Employee Compensation, or the total US comp, slowed -120bps to 4% on a 3 mo SAAR basis, which is the slowest since Mar 2021. It’s below the Fed Funds Rate, a situation that typically cautions recession. But will the Fed let assets go bananas next week and talk about pausing? Interestingly, 42M points out that if the Fed would come out dovish, then markets could tank, because investors would be really worried about the state of the economy pushing them to change course unexpectedly. That would be 2-for-1 bananas.
Recession Case
ASR was out this week reminding investors that economic data of today always looks like we’re headed for a soft landing when the economy moves from expansion to contraction, but the data typically keeps worsening (not stabilizing around current levels). Also, they point to the Fed needing to believe that the decline in inflation is continuing, and they will look to the labor market for that…and labor is pretty strong right now…so more hikes will be on the horizon. They actually make a similar case to 42M in that dovishness/easing by the Fed would mean that we’re in a world of hurt, and risk assets would suffer. So, two smart independent groups with the same message.
Oil Up
The EU plans new sanctions on Russia, and China is reopening. Thus, oil is up.
Intel Briefing
It was less of a briefing and more of a caution with earnings out of Intel. Mgmt warned that "significant economic uncertainty” is hurting profits. Amex gave an upbeat earnings forecast, though and Visa reported well too….which was at odds with Mastercard’s this week, so it’s the have’s and have not’s story playing out.
Cannabis Correction
The ave cannabis stock fell by -69% last year, per Stifel. That compares to the S&P down -19%. Now companies have to figure out if they can stay public, how to manage costs/labor, and how to get their shareholders back.
Repo Man
BBG is out with a story that Americans are falling behind on car payments at a higher rate than in 2009. People took out bigger loans to get a used car during the pandemic when prices rose, so with inflation so high, they don’t have as much cashflow to service the payments. When you get your car repo’d, then you have to pay a fee to get it back, and your credit score gets hit for around 7 years according to Experian, so it’s a vicious cycle for many folks.
