Post by Admin/YBB on Dec 3, 2022 6:38:03 GMT -6
Pg 28, TRADER. With market expectations of lower INFLATION and moderating FED, Christmas may have come early on the Wall Street. Investors are wondering whether the bear market is over, or this is just a bear market rally that will disappoint? The SP500 struggled to stay above 200-dMA. Typically, a bear market bottom comes after RECESSION begins (even when that is known in the hindsight, but now doesn’t feel like a recession, may be in 2023) and the FED finishes tightening (that is also not yet, but may be by mid-2023). The timing of the FED-PIVOT will be critical for the market (a continuing up-move vs another low-test).
With uncertain market outlook for 2023, consider DEFENSIVE areas of healthcare (PFE, MRK, AMGN), consumer-staples (KR, SJM, KHC, MO), utilities (D, FE, ETR, PEG), telecom (VZ, CMCSA, CHTR). As valuations are already stretched in these areas, be selective.
INFLATION may have peaked. But lower inflation may not be good for companies that aggressively boosted their margins during rising inflation – TSLA, DIS, MU, CF, NUE, RJF, ON, AIG.
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.
16th & 17th rate hikes, FOMC 12/14/22+ 50 bps hike possible (rate 4.25-4.50%) (CPI report on 12/13/22 while the FOMC meets)
Good riddance, 2022
1st rate hikes of 2023, FOMC 2/1/23+ 25 bps
2nd rate hike, FOMC 3/22/23+ 25 bps (rate 4.75-5.00%; likely cycle peak)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.24%, SP500 +1.13%, Nasdaq Comp +2.09%, R2000 +1.27%. DJ Transports +0.54%; DJ Utilities +0.38%. (Rotating spot ST Treasury SHY +0.27%) US$ index (spot) -1.37%, oil/WTI futures +4.85%, gold futures +2.43%.
YTD (index changes only), DJIA -5.25%, SP500 -14.57%, Nasdaq Comp -26.74%. (Rotating spot ST Treasury SHY -4.83%)
Pg 40: NYSE cumulative (5-day) A/D line rose for 3rd week (it bottomed in October); ratio of winners:losers 2:1. (Monday was 85% downside-volume day) (Wednesday was 90%+ upside-volume day)
Pg 31, EUROPE. The UK sports-betting company Entain/GMVHY (fwd P/E 17.6) is benefitting from the FIFA World Cup. It has operations in 31 territories and is growing by acquisitions; there is a joint-venture Bet MGM with MGM Resorts/MGM. The US will host the 2026 World Cup; sports-betting is live in 31 US states with 5 more to be live soon.
Pg 31, EMERGING MARKETS. The US oil deal with VENEZUELA (PDVSA-Chevron/CVX) may not amount to much – the Venezuelan oil production is down to only 700,000 barrel/day from 2.5 million/day 7 years ago. The US may get only 150,000 barrels/day for 2 years and then major capex will be required because much of the Venezuelan oil is from small wells with 15-20% per year depletion rates. The US has also conditioned its deal on fresh elections by 2024 and that may make it a no go deal for President MADURO.
Pg 32, OPTIONS. Interactive Brokers/IBKR is attractive – rising rates benefit brokers (financials). Founder/Chairman Thomas PETERFFY has a majority control. Combo of put-selling and call-buying is recommended.
(SP500 VIX 19.06, Nasdaq 100 VXN 24.78, options SKEW 117.79, bond MOVE 118.62) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 33, COMMODITIES. Weakness in the US HOUSING has crashed LUMBER, down -63% YTD (-72.2% from March peak). Rising mortgage RATES and CONSTRUCTION COSTS have hurt housing AFFORDABILITY. Lumber IMPORTS also remain strong. It may take about 2 years for housing and lumber to recover.
Pg 45: An up week in EUROPE (Denmark +3.59%, Norway -0.56%, Greece -2.30%) and an up week in ASIA (China +8.16%, Japan -3.10%).
TREASURY* 3-mo yield 4.34%, 1-yr 4.69%, 2-yr 4.28%, 5-yr 3.67%, 10-yr 3.51%, 30-yr 3.56% (3m-2y inverted by 6 bps; it is close to Powell’s favorite but obscure 3m-18m, 3m-3m-18mForward). REAL yields 5-yr 1.16%, 10-yr 1.08%, 30-yr 1.15%.
DOLLAR fell, ^DXY 104.51, -1.4% (pg 50). GOLD rose to $1,785, +1.9% (Handy & Harman spot, Thursday; pg 52); the gold-miners rose. (^XAU was at 124.40, +5.19% for the week)
Top FDIC insured savings deposit rates** (This feature has been discontinued)
US SAVINGS I-Bonds^, current rate 6.89% (annualized); fixed/base rate +0.40%. Rates change on May 1 & November 1.
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**For local rates www.depositaccounts.com/banks/rates-map/
^Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS) www.treasurydirect.gov/marketable-securities/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 16: COVER STORY, ”The HOUSING Market’s Big Chill”. The housing market has cooled and 2023 may be worse. The mortgage RATES have risen sharply; home SALES are down; home PRICES are weak; housing AFFORDABILITY is down; homes are on the market for 63+ days; many homeowners don’t want to give up their low-rate mortgages for higher rate mortgages. Housing related INDUSTRIES (homebuilders, home furnishing, home services, mortgage underwriting and servicing, etc) will be affected. On the other hand, the CPI may go down – the housing contribution is through rents/OERs. Most vulnerable are the markets with recent booms – Nashville, Phoenix, Austin, Boise. Those who have to move due to life and job changes may get better financing from LOCAL/community banks or credit unions.
Pg 20: HOUSING STOCKS are already looking beyond the near-term troubles and have rebounded from the June lows. This is based on the premise that the FED pivots in early/mid-2023. Attractive homebuilders include DHI, LEN, NVR, PHM, TOL; building products FBHS, MAS, WHR; ETFs ITB, XHB.
Pg 6, UP & DOWN WALL STREET. POWELL was dovish in his talk this week, but a strong JOBS report threw cold water on an early FED-PIVOT. This 2-month rally with SP500 +14.1% has been among the strongest since 1936; long-term Treasuries also had an impressive move in November. Under the hood, the jobs report showed weak areas – hours worked were lower; the household surveys showed job slump. The CME FedWatch is now projecting for the next 4 FOMC meetings 50-25-25-0 bps hikes to 4.75-5.00% peak fed funds rate.
Battered SPACs and CEFs are attractive. The SPACs that cannot find suitable mergers in 18-24 months must return the money to investors; the ETF SPCZ uses only pre-merger SPACs to benefit from the narrowing of discounts plus earnings on cash. Leveraged CEFs at discounts include HYT, JQC, BCAT, GUG; muni MUI.
Pg 9, STREETWISE. Money manager T Rowe Price/TROW (AUM $1.69 trillion) is now attractive – among 15 analysts that follow it, there are no buys, all are sells or holds; that is extreme negativity. Operating MARGIN is 50%. BRAND awareness is at #3 with Fidelity #1, Vanguard #2, BlackRock #4. A recent acquisition was Oak Hill Advisors (at $4.2 billion; AUM $56 billion). Price has been hurt by high INFLATION and RATES. Firm has a GROWTH tilt, and this was a bad year for that; the YTD outflows were $59 billion. Its 124 active funds have outperformed their benchmarks in 73% of rolling 10-year periods.
Edit/Add: I was surprised that nobody in Barron's noted dollar trend reversal. Dollar on the way up was blamed for everything under the Sun, but now analysts/strategists have million other reasons for the rally in stocks and gold.
stockcharts.com/h-sc/ui?s=%24USD&p=D&b=5&g=0&id=p86891064306
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
With uncertain market outlook for 2023, consider DEFENSIVE areas of healthcare (PFE, MRK, AMGN), consumer-staples (KR, SJM, KHC, MO), utilities (D, FE, ETR, PEG), telecom (VZ, CMCSA, CHTR). As valuations are already stretched in these areas, be selective.
INFLATION may have peaked. But lower inflation may not be good for companies that aggressively boosted their margins during rising inflation – TSLA, DIS, MU, CF, NUE, RJF, ON, AIG.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
16th & 17th rate hikes, FOMC 12/14/22+ 50 bps hike possible (rate 4.25-4.50%) (CPI report on 12/13/22 while the FOMC meets)
Good riddance, 2022
1st rate hikes of 2023, FOMC 2/1/23+ 25 bps
2nd rate hike, FOMC 3/22/23+ 25 bps (rate 4.75-5.00%; likely cycle peak)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +0.24%, SP500 +1.13%, Nasdaq Comp +2.09%, R2000 +1.27%. DJ Transports +0.54%; DJ Utilities +0.38%. (Rotating spot ST Treasury SHY +0.27%) US$ index (spot) -1.37%, oil/WTI futures +4.85%, gold futures +2.43%.
YTD (index changes only), DJIA -5.25%, SP500 -14.57%, Nasdaq Comp -26.74%. (Rotating spot ST Treasury SHY -4.83%)
Pg 40: NYSE cumulative (5-day) A/D line rose for 3rd week (it bottomed in October); ratio of winners:losers 2:1. (Monday was 85% downside-volume day) (Wednesday was 90%+ upside-volume day)
Pg 31, EUROPE. The UK sports-betting company Entain/GMVHY (fwd P/E 17.6) is benefitting from the FIFA World Cup. It has operations in 31 territories and is growing by acquisitions; there is a joint-venture Bet MGM with MGM Resorts/MGM. The US will host the 2026 World Cup; sports-betting is live in 31 US states with 5 more to be live soon.
Pg 31, EMERGING MARKETS. The US oil deal with VENEZUELA (PDVSA-Chevron/CVX) may not amount to much – the Venezuelan oil production is down to only 700,000 barrel/day from 2.5 million/day 7 years ago. The US may get only 150,000 barrels/day for 2 years and then major capex will be required because much of the Venezuelan oil is from small wells with 15-20% per year depletion rates. The US has also conditioned its deal on fresh elections by 2024 and that may make it a no go deal for President MADURO.
Pg 32, OPTIONS. Interactive Brokers/IBKR is attractive – rising rates benefit brokers (financials). Founder/Chairman Thomas PETERFFY has a majority control. Combo of put-selling and call-buying is recommended.
(SP500 VIX 19.06, Nasdaq 100 VXN 24.78, options SKEW 117.79, bond MOVE 118.62) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 33, COMMODITIES. Weakness in the US HOUSING has crashed LUMBER, down -63% YTD (-72.2% from March peak). Rising mortgage RATES and CONSTRUCTION COSTS have hurt housing AFFORDABILITY. Lumber IMPORTS also remain strong. It may take about 2 years for housing and lumber to recover.
Pg 45: An up week in EUROPE (Denmark +3.59%, Norway -0.56%, Greece -2.30%) and an up week in ASIA (China +8.16%, Japan -3.10%).
TREASURY* 3-mo yield 4.34%, 1-yr 4.69%, 2-yr 4.28%, 5-yr 3.67%, 10-yr 3.51%, 30-yr 3.56% (3m-2y inverted by 6 bps; it is close to Powell’s favorite but obscure 3m-18m, 3m-3m-18mForward). REAL yields 5-yr 1.16%, 10-yr 1.08%, 30-yr 1.15%.
DOLLAR fell, ^DXY 104.51, -1.4% (pg 50). GOLD rose to $1,785, +1.9% (Handy & Harman spot, Thursday; pg 52); the gold-miners rose. (^XAU was at 124.40, +5.19% for the week)
Top FDIC insured savings deposit rates** (This feature has been discontinued)
US SAVINGS I-Bonds^, current rate 6.89% (annualized); fixed/base rate +0.40%. Rates change on May 1 & November 1.
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**For local rates www.depositaccounts.com/banks/rates-map/
^Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS) www.treasurydirect.gov/marketable-securities/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 16: COVER STORY, ”The HOUSING Market’s Big Chill”. The housing market has cooled and 2023 may be worse. The mortgage RATES have risen sharply; home SALES are down; home PRICES are weak; housing AFFORDABILITY is down; homes are on the market for 63+ days; many homeowners don’t want to give up their low-rate mortgages for higher rate mortgages. Housing related INDUSTRIES (homebuilders, home furnishing, home services, mortgage underwriting and servicing, etc) will be affected. On the other hand, the CPI may go down – the housing contribution is through rents/OERs. Most vulnerable are the markets with recent booms – Nashville, Phoenix, Austin, Boise. Those who have to move due to life and job changes may get better financing from LOCAL/community banks or credit unions.
Pg 20: HOUSING STOCKS are already looking beyond the near-term troubles and have rebounded from the June lows. This is based on the premise that the FED pivots in early/mid-2023. Attractive homebuilders include DHI, LEN, NVR, PHM, TOL; building products FBHS, MAS, WHR; ETFs ITB, XHB.
Pg 6, UP & DOWN WALL STREET. POWELL was dovish in his talk this week, but a strong JOBS report threw cold water on an early FED-PIVOT. This 2-month rally with SP500 +14.1% has been among the strongest since 1936; long-term Treasuries also had an impressive move in November. Under the hood, the jobs report showed weak areas – hours worked were lower; the household surveys showed job slump. The CME FedWatch is now projecting for the next 4 FOMC meetings 50-25-25-0 bps hikes to 4.75-5.00% peak fed funds rate.
Battered SPACs and CEFs are attractive. The SPACs that cannot find suitable mergers in 18-24 months must return the money to investors; the ETF SPCZ uses only pre-merger SPACs to benefit from the narrowing of discounts plus earnings on cash. Leveraged CEFs at discounts include HYT, JQC, BCAT, GUG; muni MUI.
Pg 9, STREETWISE. Money manager T Rowe Price/TROW (AUM $1.69 trillion) is now attractive – among 15 analysts that follow it, there are no buys, all are sells or holds; that is extreme negativity. Operating MARGIN is 50%. BRAND awareness is at #3 with Fidelity #1, Vanguard #2, BlackRock #4. A recent acquisition was Oak Hill Advisors (at $4.2 billion; AUM $56 billion). Price has been hurt by high INFLATION and RATES. Firm has a GROWTH tilt, and this was a bad year for that; the YTD outflows were $59 billion. Its 124 active funds have outperformed their benchmarks in 73% of rolling 10-year periods.
Edit/Add: I was surprised that nobody in Barron's noted dollar trend reversal. Dollar on the way up was blamed for everything under the Sun, but now analysts/strategists have million other reasons for the rally in stocks and gold.
stockcharts.com/h-sc/ui?s=%24USD&p=D&b=5&g=0&id=p86891064306
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).