Post by Admin/YBB on Jun 4, 2022 5:45:05 GMT -6
Pg 31, TRADER. Stocks and bonds have been TRENDLESS despite high volatility. Business outlooks are mixed. Momentum ETF MTUM is down 20% YTD. But market LEADERSHIP will change. Stocks that were leading before the bear market are not the ones leading out of the bear market. So, which new trend will be sustainable? Value/cyclicals over growth, small-caps over large-caps, international over US?
OIL E&P stocks for $150+ oil include CPE, SBOW, MUR, OVV, CNQ. Risk is that high oil prices will lead to demand destruction but before that there will be huge profits and cash flows for oil companies. (Also watch very high 3-2-1 crack spreads that will flow into refinery profits)
INDEX PROVIDERS MSCI (fwd P/E 34) and SPGI (fwd P/E 23) are attractive although MSCI may have an edge. MSCI has been hurt by the current stock slump, but its ESG business has strong growth. SPGI warned about slowdown in its bond credit rating business but that should be temporary.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
4th & 5th rate hikes, FOMC 6/15/22+ (50 bps hike possible)
6th & 7th rate hike, FOMC 7/27/22+ (50 bps hike possible)
8th & 9th rate hike, FOMC 9/21/22+ (50 bps hike possible)
10th rate hike, FOMC 11/2/22+
11th rate hike FOMC 12/14/22+ (target 2.75-3.00%)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.94%, SP500 -1.20%, Nasdaq Comp -0.98%, R2000 -0.26%. DJ Transports +0.00%; DJ Utilities -1.45%. (Rotating spot equal-weight high-dividend LC-blend SPYD -1.80%) US$ index (spot) +0.48%, oil/WTI futures +3.30%, gold futures -0.32%.
YTD (index changes only), DJIA -9.46%, SP500 -13.80%, Nasdaq Comp -23.22%. (Rotating spot equal-weight high-dividend LC-blend SPYD +4.99 6.60%)
Pg 44: NYSE cumulative (5-day) A/D line fell.
Pg 34, EUROPE. Stellantis (STLA; fwd P/E 3.2 only) is attractive. When the old Chrysler dropped out of the US big 3 (due to its various European mergers), the US investors lost interest. Perception is also that STLA is behind GM and F in the EVs but not by much.
Pg 34, EMERGING MARKETS. Saudi Arabia is saving/banking its OIL WINDFALL of almost $1 billion/day. That is much more money than MBS can spend even with his wildest ideas. Suddenly, everyone is courting MBS – MACRON-France, JOHNSON-UK, BIDEN-US (who may also visit Saudi Arabia), and Jamal KHASHOGGI is nearly forgotten. Eventually, the beneficiaries of all this extra money will be Saudi banks and infrastructure development companies.
Pg 35, OPTIONS. The VALUE index has caught up with the growth index in performance since 03/2020. Some fallen growth stocks are now value stocks (AVGO + VMW, QCOM, etc). Recommended are selling short-dated puts.
(SP500 VIX 24.79 (high), Nasdaq 100 VXN 31.75 (high), options SKEW 122.25 (not high), bond MOVE 97.73 (high) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 36, COMMODITIES. Outlook for NATURAL GAS is very bullish. The supply deficit may last for years. Production is constrained due to shortage of labor, low industry capex (which is waiting for higher stable prices), transportation/logistics for LNG. Nitrogen based fertilizers also use natural gas. Inventories are dwindling. Europe is scrambling for non-Russian natural gas. A huge risk is recession. Invest via futures or ETF UNL.
Pg 49: A down week in EUROPE (Denmark +3.14%, Spain -2.46%) and a good week in ASIA (China +2.79%, Singapore -0.36%) (China, HK were closed Friday-Sunday for Dragon Boat Festival).
TREASURY* 3-mo yield 1.21%, 1-yr 2.18%, 2-yr 2.66%, 5-yr 2.95%, 10-yr 2.96%, 30-yr 3.11%. DOLLAR rose, ^DXY 102.17, +0.5%% (pg 54). GOLD rose to $1,864, +0.7% (Handy & Harman spot, Thursday) (pg 56); the gold-miners rose. (^XAU was at 133.59, +1.14% for the week)
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
Top FDIC insured savings deposit rates** (This feature seems to be discontinued)
**For local rates www.depositaccounts.com/banks/rates-map/
US SAVINGS I-Bonds, current rate 9.62% (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 18: COVER STORY “The WEDDING BOOM is Hiding a Troubling Trend for the Economy”. Love, marriage, babies, divorce, that is the typical cycle. There is a post-pandemic rush for weddings this year (up +25%). But this wedding boom is unlikely to reverse the low and declining BIRTH RATES. Babies are complex issues and ECONOMICS are unfavorable. Many married couples are deciding not to have children, or adopt voluntarily, or just have pets. Unmarried couples living together is also a growing trend, but such couples are less likely to have children than married couples. The US has a poor but very expensive CHILDCARE system, and for many, having children becomes an expensive and career limiting proposition. Many companies don’t provide paid maternity and/or parental leaves. And often, planned deferrals for having kids become permanent due to unforgiving Nature.
There are long-term implications of these trends for the US consumer spending and safety net programs such as SOCIAL SECURITY and MEDICARE (declining younger pool, growing older pool). The breakeven US birth rate is 2.1 per woman in her lifetime, but that is only 1.66 now. In recent decades, some of the shortfall was made up from IMMIGRATION, but those came to a halt during the pandemic. Beneficiaries of current trends are JWN, TGT (wedding and baby supplies); AVB, EQR (apartment REITs).
Supplement GUIDE TO WEALTH has good features on the ESG (see Part 2) followed by ad listings of the Top Advisor Guide (a state-by-state), Top RIA Firms, Top Advisory Teams.
Pg 6, UP & DOWN WALL STREET. JUNE is typically not a good month for the stock market. It started badly with Jamie DIMON’s (JPM) warning about “a hurricane” and Elon MUSK’s (TSLA) “super bad feeling”. A record number of pink slips were handed out by dozens of tech companies in May. BoA/BAC Bull-Bear indicator has been very bearish since March (although AAII Sentiment indicator turned around this week). The Economist’s COVER featured possibilities of nuclear conflict and US recession. The SMALL-CAP P/Es are near their 2009 and 2020 lows. Cathie WOOD’s ARKK made a roundtrip to March 2020 level. So, the recent market bounce was expected but it may not last. A good JOBS report was no help. JOLTS report also continued to show a huge gap between vacancies and unemployed (some say that JOLTS data are distorted by many ads for remote work). New unemployment claims are also low. But these data may be stale as several tech companies have announced LAYOFFS or postponements in hiring. The FED is tightening (and so are several other central banks). But fed funds in 2-3% range may not be enough to tame this high INFLATION. The Fed may stick with its tough message of several 50-bps RATE hikes (3+?) and more 25-bps hikes. While rate hikes won’t affect supply issues, they would dampen demand.
After the bond selloff in anticipation of FED moves, agency MBS (ETFs MBB, VMBS), mREITs (AGNC, PMT), HY munis are attractive.
Pg 9, STREETWISE. Target-date funds (TDFs, 1994- ) in 401k/403b haven’t worked as set-and-forget retirement funds. According to BoA/BAC, TDF 2040 lagged the SP500 with about the same volatility, and also lagged traditional 60-40 funds. Reasons include foreign allocations, higher-quality bonds, rigid glide-paths.
Scientific instruments/equipment maker Waters (WAT) has outperformed the market since Udit BATRA took over as CEO in 09/2020. As an example of its agility, to overcome the semi-chips shortages, it has modified designs to use the chips available now rather than wait for special chips.
(More later….)
Accessible from Morningstar (M*), Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
OIL E&P stocks for $150+ oil include CPE, SBOW, MUR, OVV, CNQ. Risk is that high oil prices will lead to demand destruction but before that there will be huge profits and cash flows for oil companies. (Also watch very high 3-2-1 crack spreads that will flow into refinery profits)
INDEX PROVIDERS MSCI (fwd P/E 34) and SPGI (fwd P/E 23) are attractive although MSCI may have an edge. MSCI has been hurt by the current stock slump, but its ESG business has strong growth. SPGI warned about slowdown in its bond credit rating business but that should be temporary.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
4th & 5th rate hikes, FOMC 6/15/22+ (50 bps hike possible)
6th & 7th rate hike, FOMC 7/27/22+ (50 bps hike possible)
8th & 9th rate hike, FOMC 9/21/22+ (50 bps hike possible)
10th rate hike, FOMC 11/2/22+
11th rate hike FOMC 12/14/22+ (target 2.75-3.00%)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.94%, SP500 -1.20%, Nasdaq Comp -0.98%, R2000 -0.26%. DJ Transports +0.00%; DJ Utilities -1.45%. (Rotating spot equal-weight high-dividend LC-blend SPYD -1.80%) US$ index (spot) +0.48%, oil/WTI futures +3.30%, gold futures -0.32%.
YTD (index changes only), DJIA -9.46%, SP500 -13.80%, Nasdaq Comp -23.22%. (Rotating spot equal-weight high-dividend LC-blend SPYD +
Pg 44: NYSE cumulative (5-day) A/D line fell.
Pg 34, EUROPE. Stellantis (STLA; fwd P/E 3.2 only) is attractive. When the old Chrysler dropped out of the US big 3 (due to its various European mergers), the US investors lost interest. Perception is also that STLA is behind GM and F in the EVs but not by much.
Pg 34, EMERGING MARKETS. Saudi Arabia is saving/banking its OIL WINDFALL of almost $1 billion/day. That is much more money than MBS can spend even with his wildest ideas. Suddenly, everyone is courting MBS – MACRON-France, JOHNSON-UK, BIDEN-US (who may also visit Saudi Arabia), and Jamal KHASHOGGI is nearly forgotten. Eventually, the beneficiaries of all this extra money will be Saudi banks and infrastructure development companies.
Pg 35, OPTIONS. The VALUE index has caught up with the growth index in performance since 03/2020. Some fallen growth stocks are now value stocks (AVGO + VMW, QCOM, etc). Recommended are selling short-dated puts.
(SP500 VIX 24.79 (high), Nasdaq 100 VXN 31.75 (high), options SKEW 122.25 (not high), bond MOVE 97.73 (high) (Yahoo Finance data)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 36, COMMODITIES. Outlook for NATURAL GAS is very bullish. The supply deficit may last for years. Production is constrained due to shortage of labor, low industry capex (which is waiting for higher stable prices), transportation/logistics for LNG. Nitrogen based fertilizers also use natural gas. Inventories are dwindling. Europe is scrambling for non-Russian natural gas. A huge risk is recession. Invest via futures or ETF UNL.
Pg 49: A down week in EUROPE (Denmark +3.14%, Spain -2.46%) and a good week in ASIA (China +2.79%, Singapore -0.36%) (China, HK were closed Friday-Sunday for Dragon Boat Festival).
TREASURY* 3-mo yield 1.21%, 1-yr 2.18%, 2-yr 2.66%, 5-yr 2.95%, 10-yr 2.96%, 30-yr 3.11%. DOLLAR rose, ^DXY 102.17, +0.5%% (pg 54). GOLD rose to $1,864, +0.7% (Handy & Harman spot, Thursday) (pg 56); the gold-miners rose. (^XAU was at 133.59, +1.14% for the week)
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
Top FDIC insured savings deposit rates** (This feature seems to be discontinued)
**For local rates www.depositaccounts.com/banks/rates-map/
US SAVINGS I-Bonds, current rate 9.62% (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 18: COVER STORY “The WEDDING BOOM is Hiding a Troubling Trend for the Economy”. Love, marriage, babies, divorce, that is the typical cycle. There is a post-pandemic rush for weddings this year (up +25%). But this wedding boom is unlikely to reverse the low and declining BIRTH RATES. Babies are complex issues and ECONOMICS are unfavorable. Many married couples are deciding not to have children, or adopt voluntarily, or just have pets. Unmarried couples living together is also a growing trend, but such couples are less likely to have children than married couples. The US has a poor but very expensive CHILDCARE system, and for many, having children becomes an expensive and career limiting proposition. Many companies don’t provide paid maternity and/or parental leaves. And often, planned deferrals for having kids become permanent due to unforgiving Nature.
There are long-term implications of these trends for the US consumer spending and safety net programs such as SOCIAL SECURITY and MEDICARE (declining younger pool, growing older pool). The breakeven US birth rate is 2.1 per woman in her lifetime, but that is only 1.66 now. In recent decades, some of the shortfall was made up from IMMIGRATION, but those came to a halt during the pandemic. Beneficiaries of current trends are JWN, TGT (wedding and baby supplies); AVB, EQR (apartment REITs).
Supplement GUIDE TO WEALTH has good features on the ESG (see Part 2) followed by ad listings of the Top Advisor Guide (a state-by-state), Top RIA Firms, Top Advisory Teams.
Pg 6, UP & DOWN WALL STREET. JUNE is typically not a good month for the stock market. It started badly with Jamie DIMON’s (JPM) warning about “a hurricane” and Elon MUSK’s (TSLA) “super bad feeling”. A record number of pink slips were handed out by dozens of tech companies in May. BoA/BAC Bull-Bear indicator has been very bearish since March (although AAII Sentiment indicator turned around this week). The Economist’s COVER featured possibilities of nuclear conflict and US recession. The SMALL-CAP P/Es are near their 2009 and 2020 lows. Cathie WOOD’s ARKK made a roundtrip to March 2020 level. So, the recent market bounce was expected but it may not last. A good JOBS report was no help. JOLTS report also continued to show a huge gap between vacancies and unemployed (some say that JOLTS data are distorted by many ads for remote work). New unemployment claims are also low. But these data may be stale as several tech companies have announced LAYOFFS or postponements in hiring. The FED is tightening (and so are several other central banks). But fed funds in 2-3% range may not be enough to tame this high INFLATION. The Fed may stick with its tough message of several 50-bps RATE hikes (3+?) and more 25-bps hikes. While rate hikes won’t affect supply issues, they would dampen demand.
After the bond selloff in anticipation of FED moves, agency MBS (ETFs MBB, VMBS), mREITs (AGNC, PMT), HY munis are attractive.
Pg 9, STREETWISE. Target-date funds (TDFs, 1994- ) in 401k/403b haven’t worked as set-and-forget retirement funds. According to BoA/BAC, TDF 2040 lagged the SP500 with about the same volatility, and also lagged traditional 60-40 funds. Reasons include foreign allocations, higher-quality bonds, rigid glide-paths.
Scientific instruments/equipment maker Waters (WAT) has outperformed the market since Udit BATRA took over as CEO in 09/2020. As an example of its agility, to overcome the semi-chips shortages, it has modified designs to use the chips available now rather than wait for special chips.
(More later….)
Accessible from Morningstar (M*), Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).