Post by Admin/YBB on Dec 17, 2022 6:22:21 GMT -6
Pg 35, TRADER. The FED is making a big mistake and the stock market will pay the price in 2023 (as in 2022). The fed fund terminal rate now seems 5%+ (no surprise to the fed fund futures market) but it may remain high for a while (Powell emphasized that there may not be cut(s) in 2023, and the fed fund futures market doesn’t agree). Fed’s new economic projections for 2023 were +0.5% GDP growth and 4.6% unemployment rate. The CPI is declining rapidly and may be +4% yoy in March, +3% yoy in May, but that would still be over Fed’s +2% average target. James STACK (InvesTech) says that BEAR markets end AFTER a Fed PIVOT; since 1950, stocks had double-digit declines AFTER the 1st rate cuts (exceptions were in 1989, 1995), so be patient.
In a bad year for REITs (-25% YTD), the high-end mall REIT Simon Property/SPG is attractive. Relatively strong REIT areas include industrials, data centers, cell towers, self-storage.
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.
1st rate hike 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)
Rest, FOMC 5/3/22 and several FOMCs after
Cuts at Q4 FOMCs (but Powell said that this is unlikely)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -1.66%, SP500 -2.08%, Nasdaq Comp -2.72%, R2000 -1.85%. DJ Transports -0.18%; DJ Utilities -1.14%. (Rotating spot real estate XLRE -2.09%) US$ index (spot) UNCH, oil/WTI futures -4.60%, gold futures -0.45%.
YTD (index changes only), DJIA -9.41%, SP500 -19.17%, Nasdaq Comp -31.57%. (Rotating spot real estate XLRE -27.62%)
Pg 48: NYSE cumulative (5-day) A/D line fell for a 3rd week; ratio of winners:losers 1:2. (Monday was a strong up day but with only 73% upside-volume; Thursday, post-FOMC, was 86% downside-volume day.)
Pg 38, EUROPEAN TRADER. For tough 2023, with high inflation and energy costs, attractive sectors will be healthcare, utilities, banking and consumer-driven areas.
Pg 38, EMERGING MARKETS. There are hopes that EMs may finally have a good year in 2023 due to DOLLAR weakening and CHINA reopening. 2022 wasn’t so bad for EM-ex-China. In China, the consumer stocks and new-techs may do well due to government stimulus and policies. But the EM indexes are dominated by the Big 4, BABA, TCEHY, TSM, Samsung Electronics and those aren’t very exciting.
Pg 39, OPTIONS. 2023 would be a volatile year due to uncertainties from the FED and the economy (soft-landing or recession?). Remember the CONTRARIAN strategy – buy when fear gauge VIX is high, sell when VIX is low (some do just the opposite). Using options makes trading easier and requires less capital.
(SP500 VIX 22.62 (high), Nasdaq 100 VXN 27.33 (high), options SKEW 120.04, bond MOVE 113.65) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 41, COMMODITIES. Divergence and volatility in commodities will continue in 2023. ENERGY (oil, gas, coal) supplies will remain tight. BASE METALS (aluminum, copper, steel) may turnaround on China reopening. GRAINS will depend on the weather.
Pg 53: A bad week in EUROPE (Greece +0.82%, Denmark -0.02%, Netherlands -2.85%) and a down week in ASIA (New Zealand +0.82%, China -2.63%).
TREASURY* 3-mo yield 4.31%, 1-yr 4.61%, 2-yr 4.17%, 5-yr 3.61%, 10-yr 3.48%, 30-yr 3.53%. REAL yields 5-yr 1.47%, 10-yr 1.35%, 30-yr 1.40%.
DOLLAR fell, ^DXY 104.84, -0.01% (pg 58). GOLD fell to $1,793, -0.2% (Handy & Harman spot, Thursday; pg 60); the gold-miners fell. (^XAU was at 117.58, -1.93% 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, ”Outlook 2023”. STOCK TR +10% after a drop. The FED tightening may lead to RECESSION or soft-landing. The economy is in a decent shape now and may remain so in Q1 and Q2. EARNINGS will be pressured as inflation moderates but labor costs keep rising; the Q4 earnings season starts in mid-January. The VALUE and CYCLICAL stocks may outperform growth; the SMALL-CAPS may outperform large-caps; the DEFENSIVE sectors such as healthcare may be attractive. The FIXED-INCOME (investment-grade, muni) will be attractive in 2023; the HY will be fine at some point. Following are ranges of predictions by several strategists:
SP500: 3,950-4,300
SP500 EPS: $199-231
GDP Growth: 0.0-1.0%
Inflation, PCE: 2.2-3.5%
Fed Funds: 4.25-4.75% to 5.00-5.25%
Pg 6, UP AND DOWN WALL STREET. It’s useless to predict the ENERGY markets as they are affected by cartels, pandemics, wars, technology, supply and demand. So, what is the point of an army of private and government analysts doing just that by using complex models, data from drones over storage tank facilities, traffic data, credit card data, gas pump tracking, etc? For 2023, the wide range for oil is $50-100. Complicating factors also include renewable energy, coming hydrogen revolution, nuclear energy (new developments were reported on fusion), recession fears, China reopening. Recent SANCTIONS on shipping of Russian oil and PRICE-CAPS (for non-US, non-EU, non-UK) haven’t been effective as much of the Russian oil has been diverted to Asia. If the oil prices fall too much, the OPEC may cut production and the US may start to fill its SPR (the DOE is now taking bids to buy oil for 02/2023 delivery).
Pg 9, STREETWISE. Online entertainment and education company Roblox (RBLX; 03/2021 IPO; P/S 6; losses) has 57 million users, 50% kids under 12. Sales are declining; it is burning cash in 2022, 2024; the stock is down more than 50% from the IPO price. Users use “Robux” (800 for $9.99) to buy stuff online with Roblox taking 30% cut. Game developers earn Robux but those can be cashed after 100,000 Robux at deeply discounted prices of 25-30% of the purchase prices of Robux.
The JANUARY Effect may have disappeared as many investors spread their tax-loss harvesting (TLH; institutional during October, retail during December) and don’t wait until the last days of December.
Beware of leveraged CEFs at discounts. But those may see January Effect bounces and some candidates may be NHS, VLT; muni MVT, MYD, NMZ.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
In a bad year for REITs (-25% YTD), the high-end mall REIT Simon Property/SPG is attractive. Relatively strong REIT areas include industrials, data centers, cell towers, self-storage.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
1st rate hike of 2023, FOMC 2/1/23+ 25 bps
2nd rate hike, FOMC 3/22/23+ 25 bps (rate 4.75-5.00%; likely cycle peak)
Rest, FOMC 5/3/22 and several FOMCs after
Cuts at Q4 FOMCs (but Powell said that this is unlikely)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -1.66%, SP500 -2.08%, Nasdaq Comp -2.72%, R2000 -1.85%. DJ Transports -0.18%; DJ Utilities -1.14%. (Rotating spot real estate XLRE -2.09%) US$ index (spot) UNCH, oil/WTI futures -4.60%, gold futures -0.45%.
YTD (index changes only), DJIA -9.41%, SP500 -19.17%, Nasdaq Comp -31.57%. (Rotating spot real estate XLRE -27.62%)
Pg 48: NYSE cumulative (5-day) A/D line fell for a 3rd week; ratio of winners:losers 1:2. (Monday was a strong up day but with only 73% upside-volume; Thursday, post-FOMC, was 86% downside-volume day.)
Pg 38, EUROPEAN TRADER. For tough 2023, with high inflation and energy costs, attractive sectors will be healthcare, utilities, banking and consumer-driven areas.
Pg 38, EMERGING MARKETS. There are hopes that EMs may finally have a good year in 2023 due to DOLLAR weakening and CHINA reopening. 2022 wasn’t so bad for EM-ex-China. In China, the consumer stocks and new-techs may do well due to government stimulus and policies. But the EM indexes are dominated by the Big 4, BABA, TCEHY, TSM, Samsung Electronics and those aren’t very exciting.
Pg 39, OPTIONS. 2023 would be a volatile year due to uncertainties from the FED and the economy (soft-landing or recession?). Remember the CONTRARIAN strategy – buy when fear gauge VIX is high, sell when VIX is low (some do just the opposite). Using options makes trading easier and requires less capital.
(SP500 VIX 22.62 (high), Nasdaq 100 VXN 27.33 (high), options SKEW 120.04, bond MOVE 113.65) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 41, COMMODITIES. Divergence and volatility in commodities will continue in 2023. ENERGY (oil, gas, coal) supplies will remain tight. BASE METALS (aluminum, copper, steel) may turnaround on China reopening. GRAINS will depend on the weather.
Pg 53: A bad week in EUROPE (Greece +0.82%, Denmark -0.02%, Netherlands -2.85%) and a down week in ASIA (New Zealand +0.82%, China -2.63%).
TREASURY* 3-mo yield 4.31%, 1-yr 4.61%, 2-yr 4.17%, 5-yr 3.61%, 10-yr 3.48%, 30-yr 3.53%. REAL yields 5-yr 1.47%, 10-yr 1.35%, 30-yr 1.40%.
DOLLAR fell, ^DXY 104.84, -0.01% (pg 58). GOLD fell to $1,793, -0.2% (Handy & Harman spot, Thursday; pg 60); the gold-miners fell. (^XAU was at 117.58, -1.93% 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, ”Outlook 2023”. STOCK TR +10% after a drop. The FED tightening may lead to RECESSION or soft-landing. The economy is in a decent shape now and may remain so in Q1 and Q2. EARNINGS will be pressured as inflation moderates but labor costs keep rising; the Q4 earnings season starts in mid-January. The VALUE and CYCLICAL stocks may outperform growth; the SMALL-CAPS may outperform large-caps; the DEFENSIVE sectors such as healthcare may be attractive. The FIXED-INCOME (investment-grade, muni) will be attractive in 2023; the HY will be fine at some point. Following are ranges of predictions by several strategists:
SP500: 3,950-4,300
SP500 EPS: $199-231
GDP Growth: 0.0-1.0%
Inflation, PCE: 2.2-3.5%
Fed Funds: 4.25-4.75% to 5.00-5.25%
Pg 6, UP AND DOWN WALL STREET. It’s useless to predict the ENERGY markets as they are affected by cartels, pandemics, wars, technology, supply and demand. So, what is the point of an army of private and government analysts doing just that by using complex models, data from drones over storage tank facilities, traffic data, credit card data, gas pump tracking, etc? For 2023, the wide range for oil is $50-100. Complicating factors also include renewable energy, coming hydrogen revolution, nuclear energy (new developments were reported on fusion), recession fears, China reopening. Recent SANCTIONS on shipping of Russian oil and PRICE-CAPS (for non-US, non-EU, non-UK) haven’t been effective as much of the Russian oil has been diverted to Asia. If the oil prices fall too much, the OPEC may cut production and the US may start to fill its SPR (the DOE is now taking bids to buy oil for 02/2023 delivery).
Pg 9, STREETWISE. Online entertainment and education company Roblox (RBLX; 03/2021 IPO; P/S 6; losses) has 57 million users, 50% kids under 12. Sales are declining; it is burning cash in 2022, 2024; the stock is down more than 50% from the IPO price. Users use “Robux” (800 for $9.99) to buy stuff online with Roblox taking 30% cut. Game developers earn Robux but those can be cashed after 100,000 Robux at deeply discounted prices of 25-30% of the purchase prices of Robux.
The JANUARY Effect may have disappeared as many investors spread their tax-loss harvesting (TLH; institutional during October, retail during December) and don’t wait until the last days of December.
Beware of leveraged CEFs at discounts. But those may see January Effect bounces and some candidates may be NHS, VLT; muni MVT, MYD, NMZ.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).