Post by Admin/YBB on Dec 18, 2021 7:39:13 GMT -6
Pg 45, TRADER. 2022 could be a year of boom and bust, or rather BUST-and-BOOM, for stocks. After unclear enthusiasm on Wednesday for FED’s accelerated QE-taper and raising rates sooner, the reality set in and stocks fell for the week. Covid-19-Omicron concerns added to the worries. Indexes are masking weakness underneath – while R3000 is up +21% YTD, the average US stock is down -28% from the highs. And this week, several big stocks were also weak (AAPL, MSFT). Gainers were defensive areas of utilities XLU and consumer-staples XLP. FORECASTS from 15 strategists for SP500 in 2022 were ho-hum (average +6.8%). But the market history shows that muted annual returns in 5-10% range are rare (only in 6 of 94 years), so expect VOLATILE action in 2022 and it may or may not land in 5-10% range. With STIMULUS (past, present, near future) and NEGATIVE RATES, expectations are for a move down (shallow or deep) and then a fantastic move up to new all-time highs (and just imagine the bubble talk then).
Online payment small-cap Shift4 (FOUR; -45% from April high; fwd P/E 43) is attractive after a selloff in this sector (IPAY -20% since 10/19/21). Growth of digital transactions is slowing, and fear of rising rates has hurt the valuations of fintech highflyers. FOUR processes AND analyses digital transactions for hotels, restaurants, and other clients – sort of 2 companies rolled into one. It is growing via acquisitions (recent, Venue Next in March).
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes. In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or later FOMC (note format change).
1st rate hike, FOMC 5/4/22+
2nd rate hike, FOMC 7/27/22+
3rd rate hike, FOMC 12/14/22+
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -1.68%, SP500 -1.94%, Nasdaq Comp -2.95%, R2000 -1.71%. DJ Transports -3.51%; DJ Utilities +1.54%. (Rotating spot utilities XLU +1.24%) US$ index (spot) +0.60%, oil/WTI futures -1.13%, gold futures +1.17%.
YTD (index changes only), DJIA +15.55%, SP500 +23.02%, Nasdaq Comp +17.70%. (Rotating spot utilities XLU +14.23%)
Pg 48, EUROPE. European auto sector (fwd P/E 6.8) is attractive. It has been hurt by Covid-19 and semi chips shortages that may continue through 2022. But for patient investors this cyclical sector has a strong rebound potential.
Pg 48, EMERGING MARKETS. Forget 2021, EEM -12% since 7/1/21. A confluence of factors has hurt the EMs – global inflation, pandemic, China (slowing growth; changing policies). EM valuations are at historically cheap levels. But things may improve by 2022/H2. EM central banks have room to ease monetary policy. Look for fintech, EVs, fallen tech angels.
Pg 49, OPTIONS. VOLATILITY may return in 2022. TINA and FOMO crowds should realize that Fed-put, if it still exists, won’t kick in for every stock pullback/correction. Options market activity may drive the stock market (extending the meme stock phenomenon to general stocks). There is talk of MINI-options contracts (of 5-10 shares vs 100 shares) for retail options traders. Payments for order flow are not going away and traders may be offered a choice of free commissions vs better executions.
(SP500 VIX 21.57, Nasdaq 100 VXN 26.55, SKEW 134.94) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg 50, COMMODITIES. 2021 was a good year for commodities with S&P GSCI index up +32% YTD. Energy did the best (+47%), but precious metals sold off (PMs -7%, gold -6%, silver -17%). 2022 may be a difficult year for commodities due to removal of monetary stimulus by the Fed, Covid-19, mixed global economy.
Pg 66, 70: A flat week in EUROPE (Switzerland +1.15%, Netherlands -1.17%, Greece -1.40%) and a down week in ASIA (Thailand +1.90%, China -2.95%). The equity CEF index (data to Thursday) outperformed the DJIA, and its discount was -2%.
TREASURY* 3-mo yield 0.05%, 2-yr 0.66%, 5-yr 1.18%, 10-yr 1.41%, 30-yr 1.82%. DOLLAR rose, DXY 96.67, +0.6% (pg 73). GOLD (Handy & Harman spot, Thursday) rose to $1,808, +1.6% (pg 76); the gold-miners rose. (^XAU was at 126.59, +2.05% for the week)
*Treasury Yield-Curve www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
Top FDIC insured savings deposit rates*: Money-market accounts 0.61%; 3-mo Jumbo CD 0.35%, 1-yr CDs 0.85%; 5-yr CDs 1.29% (pg 71).
*For local rates www.depositaccounts.com/banks/rates-map/
US SAVINGS I-Bonds, current rate 7.12% (annualized). Rates change on May 1 & Nov 1.
www.treasurydirect.gov/tdhome.htm
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 24: COVER STORY, “Outlook 2022/Don’t Expect Big Returns from the Stock Market Next Year as Interest Rates Rise”.2021 was a good but volatile year with some head scratchers such as NFTs. The FOMC announced that speeded up QE-taper should windup the QE in March 2022 and then the RATES may rise in 2022 (3 hikes?) and 2023 (3-4 hikes?). Economy and EARNINGS growth (+3.3% to +5.0%) may slow in 2022. INFLATION may peak in 2022/Q1 and the PCE may then settle in +2.6% t0 +3.6% range (vs Fed’s current target of +2% that may be moved up). REAL RATES will remain negative in spite of rising nominal rates. Covid-19 will remain with us in some Greek alphabet form. SP500 returns may be muted in 2022 (< 10%;SP500 targets 4,400-5,100) after strong 2020 (+18%) and 2021 (+26%). Slower growth in earnings may lead to shrinkage in P/Es.
(Remember %TR = %Dividend_yield + %Earnings_growth + %Change_in P/E)
Companies with good profit margin, pricing power and reasonable valuations should do better (ABBV, ATVI, CSCO, CMCSA, JNJ, ORCL; QUAL). Attractive sectors include financials (SCHW; USB, PNC), energy (COP, PXD), healthcare (ZBH; XLV), real estate (IYR), developed foreign markets (EMs are attractively valued but China looms big). BOND market will struggle with rising rates (10-yr 1.75-2.25%, fed funds 0.50-1.00%) and rising credit spreads. But Treasuries (including TIPS STIP, TIP and Treasury floaters FLOT) may act as BALLASTS for stocks. Also attractive are FR/BL (SRLN), private credit (VPC), BDCs (BIZD), call-writing funds (QYLD), commodities (COMT) and infrastructure plays (IFRA).
Pg 26: ENERGY stocks should continue to do well in 2022 after a blockbuster 2021 (+50%); crude oil rallied in 2021 (WTI +46%, Brent +43%). This time the energy industry is focusing on balance sheet, cash flows, profits, dividends, buybacks. Risks include Covid-19, OPEC/OPEC+ policies and actions and energy transitions.
Pg 28: After a miserable 2021, HEALTHCARE and BIOTECH may perk up in 2022 due to M&A. Risks include pandemic, FTC, FDA, drug-pricing policies.
Pg 31: CRYPTOS are ending 2021 on a down note but have promising future (block-chains, digital assets, NFTs, stablecoins). Companies like Coinbase/COIN are operating in multiple venues (exchange, broker-dealer, custody). Risks include regulations.
Pg 32: 10 stocks for 2022: AMZN, T, BRK-B, GM, HTZ, IBM, JNJ, JWN, RDS.B, V.
Pg 9, UP & DOWN WALL STREET. Strange! STOCKS fell because of worries about rising global RATES, but the BOND yields also fell. The BOE raised rates (from 0.10% to 0.25%); the ECB reduced QE but may raise rates only in 2023; the US FED will windup QE faster and raise rates in 2022 (3x). Market BREADTH has been poor. Stocks may remain under pressure through the yearend as institutional portfolios REBALANCE from outperforming stocks into underperforming bonds. INFLATION-EXPECTATIONS are down for 5 years but that doesn’t jive with expected negative real rates for quite a while. (Column points out various contradictions)
It is the market FORECASTING season for 2022 and the consensus is single-digit returns for stocks (range -5% to +14%) and negative returns for bonds; real yields will continue to be negative even with rate hikes in 2022-23. An offbeat opinion from the former Roundtable member Frank ZULAUF is a crash (SP500 3,000? $50 oil?) followed by a huge rally (SP500 6,000?), including a rally in commodities ($200 oil?). But beyond the degrees of decline and pain, several strategists suggest that there will be PAIN from reduction/unwinding of the monetary and fiscal stimulus to tame runaway INFLATION, and at some point (of high pain or blood in the streets), the FED-PUT may kick in and a FRESH CYCLE of monetary and fiscal stimulus may begin. So, be prepared for a bumpy or turbulent ride.
EXTRA. David TEPPER of Tepper Capital Management is cited for the following groups of CEFs trading at discount. Some are under tax-loss selling pressure, others have discounts because they are relatively new and are trading at discounts few months after their IPOs (typical for CEF IPOs).
Income (all newer): BCAT, TBLD, PTA, SDHY, WDI
Total Return (most newer): NBXG, BIGZ, BMEZ, AIO (the oldest in the group is only about 2 years old)
Note income-builder/world-allocation CEF TBLD is a cousin of OEF TIBAX and 2 managers are common (Kirby, Burdett).
Pg 13, STREETWISE. REITs remain attractive for 2022 (SPG, KIM, AVB, INVH); they have done well in 2021, +34% YTD. Concerns are rising rates and rich valuations for P/FFO.
(More later….)
Online payment small-cap Shift4 (FOUR; -45% from April high; fwd P/E 43) is attractive after a selloff in this sector (IPAY -20% since 10/19/21). Growth of digital transactions is slowing, and fear of rising rates has hurt the valuations of fintech highflyers. FOUR processes AND analyses digital transactions for hotels, restaurants, and other clients – sort of 2 companies rolled into one. It is growing via acquisitions (recent, Venue Next in March).
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes. In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or later FOMC (note format change).
1st rate hike, FOMC 5/4/22+
2nd rate hike, FOMC 7/27/22+
3rd rate hike, FOMC 12/14/22+
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -1.68%, SP500 -1.94%, Nasdaq Comp -2.95%, R2000 -1.71%. DJ Transports -3.51%; DJ Utilities +1.54%. (Rotating spot utilities XLU +1.24%) US$ index (spot) +0.60%, oil/WTI futures -1.13%, gold futures +1.17%.
YTD (index changes only), DJIA +15.55%, SP500 +23.02%, Nasdaq Comp +17.70%. (Rotating spot utilities XLU +14.23%)
Pg 48, EUROPE. European auto sector (fwd P/E 6.8) is attractive. It has been hurt by Covid-19 and semi chips shortages that may continue through 2022. But for patient investors this cyclical sector has a strong rebound potential.
Pg 48, EMERGING MARKETS. Forget 2021, EEM -12% since 7/1/21. A confluence of factors has hurt the EMs – global inflation, pandemic, China (slowing growth; changing policies). EM valuations are at historically cheap levels. But things may improve by 2022/H2. EM central banks have room to ease monetary policy. Look for fintech, EVs, fallen tech angels.
Pg 49, OPTIONS. VOLATILITY may return in 2022. TINA and FOMO crowds should realize that Fed-put, if it still exists, won’t kick in for every stock pullback/correction. Options market activity may drive the stock market (extending the meme stock phenomenon to general stocks). There is talk of MINI-options contracts (of 5-10 shares vs 100 shares) for retail options traders. Payments for order flow are not going away and traders may be offered a choice of free commissions vs better executions.
(SP500 VIX 21.57, Nasdaq 100 VXN 26.55, SKEW 134.94) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW?.tsrc=fin-srch
Pg 50, COMMODITIES. 2021 was a good year for commodities with S&P GSCI index up +32% YTD. Energy did the best (+47%), but precious metals sold off (PMs -7%, gold -6%, silver -17%). 2022 may be a difficult year for commodities due to removal of monetary stimulus by the Fed, Covid-19, mixed global economy.
Pg 66, 70: A flat week in EUROPE (Switzerland +1.15%, Netherlands -1.17%, Greece -1.40%) and a down week in ASIA (Thailand +1.90%, China -2.95%). The equity CEF index (data to Thursday) outperformed the DJIA, and its discount was -2%.
TREASURY* 3-mo yield 0.05%, 2-yr 0.66%, 5-yr 1.18%, 10-yr 1.41%, 30-yr 1.82%. DOLLAR rose, DXY 96.67, +0.6% (pg 73). GOLD (Handy & Harman spot, Thursday) rose to $1,808, +1.6% (pg 76); the gold-miners rose. (^XAU was at 126.59, +2.05% for the week)
*Treasury Yield-Curve www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
Top FDIC insured savings deposit rates*: Money-market accounts 0.61%; 3-mo Jumbo CD 0.35%, 1-yr CDs 0.85%; 5-yr CDs 1.29% (pg 71).
*For local rates www.depositaccounts.com/banks/rates-map/
US SAVINGS I-Bonds, current rate 7.12% (annualized). Rates change on May 1 & Nov 1.
www.treasurydirect.gov/tdhome.htm
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 24: COVER STORY, “Outlook 2022/Don’t Expect Big Returns from the Stock Market Next Year as Interest Rates Rise”.2021 was a good but volatile year with some head scratchers such as NFTs. The FOMC announced that speeded up QE-taper should windup the QE in March 2022 and then the RATES may rise in 2022 (3 hikes?) and 2023 (3-4 hikes?). Economy and EARNINGS growth (+3.3% to +5.0%) may slow in 2022. INFLATION may peak in 2022/Q1 and the PCE may then settle in +2.6% t0 +3.6% range (vs Fed’s current target of +2% that may be moved up). REAL RATES will remain negative in spite of rising nominal rates. Covid-19 will remain with us in some Greek alphabet form. SP500 returns may be muted in 2022 (< 10%;SP500 targets 4,400-5,100) after strong 2020 (+18%) and 2021 (+26%). Slower growth in earnings may lead to shrinkage in P/Es.
(Remember %TR = %Dividend_yield + %Earnings_growth + %Change_in P/E)
Companies with good profit margin, pricing power and reasonable valuations should do better (ABBV, ATVI, CSCO, CMCSA, JNJ, ORCL; QUAL). Attractive sectors include financials (SCHW; USB, PNC), energy (COP, PXD), healthcare (ZBH; XLV), real estate (IYR), developed foreign markets (EMs are attractively valued but China looms big). BOND market will struggle with rising rates (10-yr 1.75-2.25%, fed funds 0.50-1.00%) and rising credit spreads. But Treasuries (including TIPS STIP, TIP and Treasury floaters FLOT) may act as BALLASTS for stocks. Also attractive are FR/BL (SRLN), private credit (VPC), BDCs (BIZD), call-writing funds (QYLD), commodities (COMT) and infrastructure plays (IFRA).
Pg 26: ENERGY stocks should continue to do well in 2022 after a blockbuster 2021 (+50%); crude oil rallied in 2021 (WTI +46%, Brent +43%). This time the energy industry is focusing on balance sheet, cash flows, profits, dividends, buybacks. Risks include Covid-19, OPEC/OPEC+ policies and actions and energy transitions.
Pg 28: After a miserable 2021, HEALTHCARE and BIOTECH may perk up in 2022 due to M&A. Risks include pandemic, FTC, FDA, drug-pricing policies.
Pg 31: CRYPTOS are ending 2021 on a down note but have promising future (block-chains, digital assets, NFTs, stablecoins). Companies like Coinbase/COIN are operating in multiple venues (exchange, broker-dealer, custody). Risks include regulations.
Pg 32: 10 stocks for 2022: AMZN, T, BRK-B, GM, HTZ, IBM, JNJ, JWN, RDS.B, V.
Pg 9, UP & DOWN WALL STREET. Strange! STOCKS fell because of worries about rising global RATES, but the BOND yields also fell. The BOE raised rates (from 0.10% to 0.25%); the ECB reduced QE but may raise rates only in 2023; the US FED will windup QE faster and raise rates in 2022 (3x). Market BREADTH has been poor. Stocks may remain under pressure through the yearend as institutional portfolios REBALANCE from outperforming stocks into underperforming bonds. INFLATION-EXPECTATIONS are down for 5 years but that doesn’t jive with expected negative real rates for quite a while. (Column points out various contradictions)
It is the market FORECASTING season for 2022 and the consensus is single-digit returns for stocks (range -5% to +14%) and negative returns for bonds; real yields will continue to be negative even with rate hikes in 2022-23. An offbeat opinion from the former Roundtable member Frank ZULAUF is a crash (SP500 3,000? $50 oil?) followed by a huge rally (SP500 6,000?), including a rally in commodities ($200 oil?). But beyond the degrees of decline and pain, several strategists suggest that there will be PAIN from reduction/unwinding of the monetary and fiscal stimulus to tame runaway INFLATION, and at some point (of high pain or blood in the streets), the FED-PUT may kick in and a FRESH CYCLE of monetary and fiscal stimulus may begin. So, be prepared for a bumpy or turbulent ride.
EXTRA. David TEPPER of Tepper Capital Management is cited for the following groups of CEFs trading at discount. Some are under tax-loss selling pressure, others have discounts because they are relatively new and are trading at discounts few months after their IPOs (typical for CEF IPOs).
Income (all newer): BCAT, TBLD, PTA, SDHY, WDI
Total Return (most newer): NBXG, BIGZ, BMEZ, AIO (the oldest in the group is only about 2 years old)
Note income-builder/world-allocation CEF TBLD is a cousin of OEF TIBAX and 2 managers are common (Kirby, Burdett).
Pg 13, STREETWISE. REITs remain attractive for 2022 (SPG, KIM, AVB, INVH); they have done well in 2021, +34% YTD. Concerns are rising rates and rich valuations for P/FFO.
(More later….)