Post by Admin/YBB on Jan 21, 2023 6:13:58 GMT -6
Pg 36, TRADER. STOCKS are trading for soft landing (SP500 fwd P/E 17.1; falling E) and BONDS are trading for recession; the latter may prove to be right. Communications (XLC) and consumer-discretionary (XLY) are outperforming (both now include the old FANG). Higher RATES are beginning to affect the economy; housing was an early casualty. The ISM manufacturing PMI and services PMI are in contraction zones. Debt-ceiling notwithstanding, FISCAL policy will be a drag; the FED-PIVOT is not in sight. Tame your expectations.
Value stocks may also be controversial. Now attractive are CLMT, COP, CVI, DIS, DNOW, ET, HAL, MO, NEX, PM, WFC.
Small-cap Compass Diversified Holdings/CODI offers income and growth. It has several subsidiaries in industrial, healthcare and consumer markets.
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 5.00-5.25%; likely cycle peak)
FOMC 5/3/23+ Hold
FOMC 6/14/23+ Hold
Hold continues and then a cuts indicated at FOMC 11/1/23 & 12/13/23.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -2.70%, SP500 -0.66%, Nasdaq Comp +0.55%, R2000 -1.04%. DJ Transports -0.06%; DJ Utilities -2.83%. (Rotating spot long-term Treasuries -0.52%) US$ index (spot) -0.21%, oil/WTI futures +1.82%, gold futures +0.42%.
52-WK (index changes only), DJIA -2.60%, SP500 -9.67%, Nasdaq Comp -19.09%. (Rotating spot long-term Treasuries TLT -26.06%) (Note shift to 52-wk until YTD becomes meaningful again in a few weeks)
Pg 40: NYSE cumulative (5-day) A/D line rose for a 3rd week; ratio of winners:losers 1+:1.
Pg 31, EUROPEAN TRADER. STEEL producer ArcelorMittal (MT; fwd P/E 8.8; #2 globally by volume) may do fine during the 2023 slowdown/recession. Being a global producer, it is able to exploit differential energy prices by shifting production. It didn’t hedge its energy needs in Q4 and energy prices have come down. It shut 15% of its European production due to high energy costs but will reactivate that capacity as Europe may lead global recovery. It also has a noncore mining business that acts as a stabilizer.
Pg 31, EMERGING MARKETS. CHINA is trying to prop up its PROPERTY sector through relaxation of credit and lower mortgage rates; CHIR +60% since October 2022 and property bonds have done even better. But true recovery will take time after so many property bonds have defaulted ($50 billion) and housing prices are falling. The buyers are gun-shy, and banks are hesitating to lend. The confidence is low. China is trying to rescue only the higher-quality developers and some of the rest may go under. Property stocks will remain volatile.
Pg 32, OPTIONS. Stocks have rebounded on indications of inflation moderating and possible soft landing (vs recession). The earnings season will also cause more volatility. Institutions are using more index calls than individual stock calls and that lack of conviction may indicate a weak market ahead. Suggested is HEDGING with put spreads (buying near-OTM-puts, selling far-OTM-puts). Be quick to take profits in hedges.
(SP500 VIX 19.85, Nasdaq 100 VXN 24.54 (high), options SKEW 120.19, bond MOVE 114.76) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 33, COMMODITIES. Dr COPPER’s rebound (+11% YTD) will continue with CHINA reopening, the US FED slowing the pace of rate hikes and DOLLAR declining. China accounts for more than half of the global demand. Supplies have been constrained due to under investments. Copper is also key to ENERGY TRANSITION (EVs, renewables).
Pg 45: A flat week in EUROPE (Greece +1.83%, Denmark +1.33%, Belgium -1.91%) and a good week in ASIA (Indonesia +3.63%, Thailand -0.43%) (New Year of the Rabbit in China).
TREASURY* 3-mo yield 4.72%, 1-yr 4.68%, 2-yr 4.14%, 5-yr 3.56%, 10-yr 3.48%, 30-yr 3.66%. REAL yields 5-yr 1.33%, 10-yr 1.25%, 30-yr 1.42%.
DOLLAR fell, ^DXY 101.99, -0.21% (pg 50). GOLD rose to $1,925, +0.9% (Handy & Harman spot, Thursday; pg 52); the gold-miners were flat. (^XAU was at 135.67, -0.75% 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. NOTE – With half the data in, the outlook for I-Bond rate on 5/1/23 is poor and it may be 0-1% only.
*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, “Roundtable 2023, Part 2 of 3”. Recommendations from Black, Cohen, Gabelli, Priest.
Tod AHLSTEN/Parnassus, PRBLX:
Rupal BHANSALI/Ariel: AMIGY, GSK, TIMB, VIV (Part 1)
Scott BLACK/Delphi: CB, COKE, JBL, STRL (Part 2); builds his own models and estimates.
Abby COHEN/Columbia U: Daikin (Japan), DELKY, Signify (Netherlands), TM, TRO (Part 2); selected depressed techs and cyclicals are attractive; market-cap indexing and alternatives will disappoint.
Sonal DESAI/Franklin Templeton:
Henry ELLENBOGEN/Durable Capital: ABCM, DUOL, FSV, RBC, YOU (Part 1)
Mario GABELLI/Gamco: BATRA, CR, CZR, DRQ, HAL, MSGS, PARA, TV, TXT, WBD, WYNN (Part 2); lots of action in sports franchises and gaming; defense is booming globally; as usual, likes media; likes oil stocks if oil stays in $70-80 range.
David GIROUX/T Rowe Price, PRWCX:
William PRIEST/Epoch Inv Partners: ASML, CCEP, CNC, EADSY, RHHBY, RTX (Part 2); negative on Europe but several of his picks are in Europe (so, good stocks can be found anywhere).
Meryl WITMER/Eagle Capital:
Pg 6, UP AND DOWN WALL STREET. Rising GOLD may be signaling higher inflation and/or weak dollar ahead. Most professionals remain skeptical and underweight. Issues benefitting gold include global central bank diversification from dollar; more non-dollar international trade; the US debt-deficit fiasco (again); slower pace of rate hikes by the Fed. Notably, the gold bullion has outperformed the SP500 since October 2022 SP500 lows for the first time in 50 years (and gold-miners much more so).
FED QT (-$406 billion so far) has had little effect. While QE caused monetary expansion, the QT was supposed to drain liquidity. The Treasury reaching DEBT-CEILING and accelerating draws will also lessen the impact of Fed QT. Long-term rates will remain under pressure. So, the Fed’s impact remains through short-term rates only.
Pg 9, STREETWISE from WEF, Davos. They don’t clean snow/ice there, so it was difficult for a first-timer HOUGH to go from one event to another in a dress shoes. He caught up with Blackstone/BX (BREIT, etc), BorgWarner/BWA (spinoff NewCo for gasoline/diesel fuel and other systems), Thermo Fisher/TMO (a new spectrometer), Nasdaq/NDAQ (75% recurring revenues now from data analytics, Saas, cybersecurity, ESG reporting tools). If Barron’s sends him ever again to Davos (this time may have been because 3 years ago he asked in a Streetwise column, what’s the point of Davos?), he will pack clumsy snow boots to go with his fancy suit and tie, and may stay an extra day to solve world’s problems.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
Value stocks may also be controversial. Now attractive are CLMT, COP, CVI, DIS, DNOW, ET, HAL, MO, NEX, PM, WFC.
Small-cap Compass Diversified Holdings/CODI offers income and growth. It has several subsidiaries in industrial, healthcare and consumer markets.
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 5.00-5.25%; likely cycle peak)
FOMC 5/3/23+ Hold
FOMC 6/14/23+ Hold
Hold continues and then a cuts indicated at FOMC 11/1/23 & 12/13/23.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -2.70%, SP500 -0.66%, Nasdaq Comp +0.55%, R2000 -1.04%. DJ Transports -0.06%; DJ Utilities -2.83%. (Rotating spot long-term Treasuries -0.52%) US$ index (spot) -0.21%, oil/WTI futures +1.82%, gold futures +0.42%.
52-WK (index changes only), DJIA -2.60%, SP500 -9.67%, Nasdaq Comp -19.09%. (Rotating spot long-term Treasuries TLT -26.06%) (Note shift to 52-wk until YTD becomes meaningful again in a few weeks)
Pg 40: NYSE cumulative (5-day) A/D line rose for a 3rd week; ratio of winners:losers 1+:1.
Pg 31, EUROPEAN TRADER. STEEL producer ArcelorMittal (MT; fwd P/E 8.8; #2 globally by volume) may do fine during the 2023 slowdown/recession. Being a global producer, it is able to exploit differential energy prices by shifting production. It didn’t hedge its energy needs in Q4 and energy prices have come down. It shut 15% of its European production due to high energy costs but will reactivate that capacity as Europe may lead global recovery. It also has a noncore mining business that acts as a stabilizer.
Pg 31, EMERGING MARKETS. CHINA is trying to prop up its PROPERTY sector through relaxation of credit and lower mortgage rates; CHIR +60% since October 2022 and property bonds have done even better. But true recovery will take time after so many property bonds have defaulted ($50 billion) and housing prices are falling. The buyers are gun-shy, and banks are hesitating to lend. The confidence is low. China is trying to rescue only the higher-quality developers and some of the rest may go under. Property stocks will remain volatile.
Pg 32, OPTIONS. Stocks have rebounded on indications of inflation moderating and possible soft landing (vs recession). The earnings season will also cause more volatility. Institutions are using more index calls than individual stock calls and that lack of conviction may indicate a weak market ahead. Suggested is HEDGING with put spreads (buying near-OTM-puts, selling far-OTM-puts). Be quick to take profits in hedges.
(SP500 VIX 19.85, Nasdaq 100 VXN 24.54 (high), options SKEW 120.19, bond MOVE 114.76) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 33, COMMODITIES. Dr COPPER’s rebound (+11% YTD) will continue with CHINA reopening, the US FED slowing the pace of rate hikes and DOLLAR declining. China accounts for more than half of the global demand. Supplies have been constrained due to under investments. Copper is also key to ENERGY TRANSITION (EVs, renewables).
Pg 45: A flat week in EUROPE (Greece +1.83%, Denmark +1.33%, Belgium -1.91%) and a good week in ASIA (Indonesia +3.63%, Thailand -0.43%) (New Year of the Rabbit in China).
TREASURY* 3-mo yield 4.72%, 1-yr 4.68%, 2-yr 4.14%, 5-yr 3.56%, 10-yr 3.48%, 30-yr 3.66%. REAL yields 5-yr 1.33%, 10-yr 1.25%, 30-yr 1.42%.
DOLLAR fell, ^DXY 101.99, -0.21% (pg 50). GOLD rose to $1,925, +0.9% (Handy & Harman spot, Thursday; pg 52); the gold-miners were flat. (^XAU was at 135.67, -0.75% 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. NOTE – With half the data in, the outlook for I-Bond rate on 5/1/23 is poor and it may be 0-1% only.
*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, “Roundtable 2023, Part 2 of 3”. Recommendations from Black, Cohen, Gabelli, Priest.
Tod AHLSTEN/Parnassus, PRBLX:
Rupal BHANSALI/Ariel: AMIGY, GSK, TIMB, VIV (Part 1)
Scott BLACK/Delphi: CB, COKE, JBL, STRL (Part 2); builds his own models and estimates.
Abby COHEN/Columbia U: Daikin (Japan), DELKY, Signify (Netherlands), TM, TRO (Part 2); selected depressed techs and cyclicals are attractive; market-cap indexing and alternatives will disappoint.
Sonal DESAI/Franklin Templeton:
Henry ELLENBOGEN/Durable Capital: ABCM, DUOL, FSV, RBC, YOU (Part 1)
Mario GABELLI/Gamco: BATRA, CR, CZR, DRQ, HAL, MSGS, PARA, TV, TXT, WBD, WYNN (Part 2); lots of action in sports franchises and gaming; defense is booming globally; as usual, likes media; likes oil stocks if oil stays in $70-80 range.
David GIROUX/T Rowe Price, PRWCX:
William PRIEST/Epoch Inv Partners: ASML, CCEP, CNC, EADSY, RHHBY, RTX (Part 2); negative on Europe but several of his picks are in Europe (so, good stocks can be found anywhere).
Meryl WITMER/Eagle Capital:
Pg 6, UP AND DOWN WALL STREET. Rising GOLD may be signaling higher inflation and/or weak dollar ahead. Most professionals remain skeptical and underweight. Issues benefitting gold include global central bank diversification from dollar; more non-dollar international trade; the US debt-deficit fiasco (again); slower pace of rate hikes by the Fed. Notably, the gold bullion has outperformed the SP500 since October 2022 SP500 lows for the first time in 50 years (and gold-miners much more so).
FED QT (-$406 billion so far) has had little effect. While QE caused monetary expansion, the QT was supposed to drain liquidity. The Treasury reaching DEBT-CEILING and accelerating draws will also lessen the impact of Fed QT. Long-term rates will remain under pressure. So, the Fed’s impact remains through short-term rates only.
Pg 9, STREETWISE from WEF, Davos. They don’t clean snow/ice there, so it was difficult for a first-timer HOUGH to go from one event to another in a dress shoes. He caught up with Blackstone/BX (BREIT, etc), BorgWarner/BWA (spinoff NewCo for gasoline/diesel fuel and other systems), Thermo Fisher/TMO (a new spectrometer), Nasdaq/NDAQ (75% recurring revenues now from data analytics, Saas, cybersecurity, ESG reporting tools). If Barron’s sends him ever again to Davos (this time may have been because 3 years ago he asked in a Streetwise column, what’s the point of Davos?), he will pack clumsy snow boots to go with his fancy suit and tie, and may stay an extra day to solve world’s problems.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).