Post by Admin/YBB on Feb 18, 2023 6:26:42 GMT -6
Pg 27, TRADER. Sell in “May” and go away may work this year except replace “May” with “March”. This rebound from October 2022 lows is stalling as hopes for an earlier FED PIVOT fade due to stronger economic data. The SP trading range may be 4,000-4,300. But as EARNINGS weaken and RATES remain high (pressuring P/Es), stocks may struggle. Attractive (if not go away) may be mid-caps, pharma, T-Bills/Notes, gold.
The easy money era (with negative real rates) is over. Look for QUALITY stocks (with dividends, earnings growth, strong balance sheets) for uncertain times. Mentioned are AAPL, SYK, defense stocks.
Walmart (WMT; yield 1.55%; fwd P/E 22; reports 2/21/23) should benefit as shoppers trade-down due to inflation.
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.
2nd rate hike, FOMC 3/22/23+ 25 bps
3rd rate hike, FOMC 5/3/23+ 25 bps
4th rate hike, FOMC 6/14/23+ 25 bps (rate 5.25-5.50%; likely cycle peak)
FOMC 7/26/23+ Hold
FOMC 9/20/23+ Hold
FOMC 11/1/23+ Hold
FOMC 12/13/23+ Cut
Fed VC Brainard (a dove) has resigned to become the NEC Director. Now 11 FOMC voting members.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.13%, SP500 -0.28%, Nasdaq Comp +0.59%, R2000 +1.44%. DJ Transports +0.62%; DJ Utilities +0.83%. (Rotating spot HY JNK -0.38%) US$ index (spot) +0.23%, oil/WTI futures -4.24%, gold futures -1.20.
52-WK (index changes only), DJIA -0.74%, SP500 -6.20%, Nasdaq Comp -13.00%. (Rotating spot HY JNK -11.61%) (Note shift to 52-wk until YTD becomes meaningful again in a few weeks)
Pg 40: NYSE cumulative (5-day) A/D line rose; ratio of winners:losers 1+:1.
Pg 47: 4-wk moving average of net fund flows is now POSITIVE for stock, taxable bond, muni AND money-market funds (unusual, as if new money is coming into the market).
Pg 31, EUROPEAN TRADER. Porsche (POAHY; yield 4.54%; fwd P/E 20.6) is attractive in luxury-sports-car category. It was spun out of VW/VWAGY (still owns 75%) and both share some R&D and production facilities.
Pg 31, EMERGING MARKETS. TURKEY has had runaway inflation as it unconventionally eased monetary policy while inflation surged. It was a race for economic development to try to beat inflations – that rarely works. Lira has been trashed. Now, it has a terrible earthquake tragedy. Presidential elections are in June but can be delayed to March 2024; reelection of ERDOGAN is not in doubt. Be careful with volatile ETF TUR.
EXTRA. Higher-yielding EM debt has been hot (EMB, etc) and there have been strong inflows. The recent rebound has been stronger for sovereign EM debt; be careful with average spreads as they are distorted by some large spreads for lower-rated EMs. Be selective and beware that it may be late to jump into the EM debt bandwagon. (see also Income Investing, Part 2)
Pg 32, OPTIONS. RETIREES can use conservative CALL-WRITING to generate more income from their equity portfolios. Public education is necessary to highlight such noninstitutional aspects of options.
(SP500 VIX 20.02 (high), Nasdaq 100 VXN 25.82 (high), options SKEW 122.89, bond MOVE 110.11) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 33, COMMODITIES. LUMBER has been very volatile, but it may get a boost if/when the HOUSING market picks up; despite short-term headwinds for housing, its long-term prospects are good. The US lumber market is affected by domestic as well as Canadian supplies. The lumber futures markets are thin.
Pg 45: An up week in EUROPE (France +2.89%, Norway -0.60%) and a down week in ASIA (Indonesia +0.73%, HK -2.77%).
TREASURY* 3-mo yield 4.84%, 1-yr 5.00%, 2-yr 4.60%, 5-yr 4.03%, 10-yr 3.82%, 30-yr 3.88%. REAL yields 5-yr 1.46%, 10-yr 1.41%, 30-yr 1.53%.
DOLLAR rose, ^DXY 103.88, +0.24% (pg 50). GOLD fell to $1,834, -1.4% (Handy & Harman spot, Thursday; pg 52); the gold-miners fell. (^XAU was at 117.64, -4.70% 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 4/6 datapoints in, the outlook for I-Bond rate on 5/1/23 is poor and it may be 1-2% 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 14: COVER STORY (Sustainable Investing), “Why the World Is Using More PLASTIC”. A glut of cheap new virgin plastic in consumer and industrial packaging is choking the recycling centers. The US fracking produces extra NATURAL GAS that is used for virgin plastic. The EMs are behind the developed countries in adopting the ESG agenda and several new plants for virgin plastics are coming on line. Recycled plastic (HDPE/PCR) cost 2.45x the virgin plastic. With high inflation, companies find it difficult to pass on higher costs of packaging with recycled plastics. BTW, recycled plastic PET used in some disposable items is cheap now due to supply/demand imbalances those will dissipate soon. Companies are trying to address this problem by using more recycled packaging (KO, MDLZ, NSRGY, PEP, UL, etc). Oil and petrochemical companies (XOM, SHEL; DOW, LYB, etc) are investing in recycling technologies and plants. Just 5-10% of plastic is now recycled, and the rest ends up in landfills somewhere in the world; many EM countries have stopped accepting ships loaded with garbage. The EU and 8 US states (CA, NY, etc) have banned single-use plastics for many items. Recyclable plastic containers show stylized TRIANGLES with numbers inside: 1-PET, 2-HDPE, 3-7-hard to recyclable plastics that should go into trash. (I checked several plastic bottles around the house and they have triangles to indicate recyclability but no numbers inside, so this must be new)
Pg 17: Petrochemical companies include DOW, LYB, CE, BERY, ORGN, UNVR.
Pg 7, UP AND DOWN WALL STREET. With stronger data on inflation, jobs, retail sales, the projections for fed fund futures are also creeping up, to 5.25-5.50% now. The FED is less likely to pause or cut sooner. This rebound led by speculative stocks has also cooled since February 2. A couple of Fed presidents are making noises about 50-bps hike. The Fed VC and Governor BRAINARD, a dove, is leaving for the NEC. It should be noted that while the Fed has been easing, the ECB (EU), BOJ (Japan), PCOB (China) have been easing, so there is net easing globally. This may be changing too. Expect bumpy times ahead for stocks and risk assets.
BONDS are now a decent alternative to stocks. T-Bill yields have jumped from near-zero to around 5% - and no risk or volatility if held to maturity. Also attractive are investment-grade corporates (LQD), short-term TIPS (5-yr TIPS, STIP, VTIP), short-term HY (SHYG, SJNK), healthcare REITs (LTC, MPW, OHI, SBRA). Be selective with MUNIS as they have run up. Avoid FR/BL if the economy worsens (strange, because these act as ST-HY at worst, but ST-HY are recommended).
Pg 7, STREETWISE. Whether there soft or hard landing, TURBULENCE is ahead for risk-assets. Despite the FED raising rates at the fastest pace in 40 years, INFLATION and JOBS measures remain stubbornly high. Look at 6-mo changes (vs 1-mo and 12-mo changes commonly reported). Only the INTEREST sensitive sectors of economy have slowed – goods, housing, purchases on credit; the service sector remains strong. Stock VALUATIONS are not cheap and there is more room for contraction than expansion. There is now competition from money-market funds, T-Bills/Notes, bonds. Specialized ETFs (equal-weight RSP; free cash flow COWZ, GCOW; SC-value VBR) may be better than broad-based market-cap indexes.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).
The easy money era (with negative real rates) is over. Look for QUALITY stocks (with dividends, earnings growth, strong balance sheets) for uncertain times. Mentioned are AAPL, SYK, defense stocks.
Walmart (WMT; yield 1.55%; fwd P/E 22; reports 2/21/23) should benefit as shoppers trade-down due to inflation.
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.
2nd rate hike, FOMC 3/22/23+ 25 bps
3rd rate hike, FOMC 5/3/23+ 25 bps
4th rate hike, FOMC 6/14/23+ 25 bps (rate 5.25-5.50%; likely cycle peak)
FOMC 7/26/23+ Hold
FOMC 9/20/23+ Hold
FOMC 11/1/23+ Hold
FOMC 12/13/23+ Cut
Fed VC Brainard (a dove) has resigned to become the NEC Director. Now 11 FOMC voting members.
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.13%, SP500 -0.28%, Nasdaq Comp +0.59%, R2000 +1.44%. DJ Transports +0.62%; DJ Utilities +0.83%. (Rotating spot HY JNK -0.38%) US$ index (spot) +0.23%, oil/WTI futures -4.24%, gold futures -1.20.
52-WK (index changes only), DJIA -0.74%, SP500 -6.20%, Nasdaq Comp -13.00%. (Rotating spot HY JNK -11.61%) (Note shift to 52-wk until YTD becomes meaningful again in a few weeks)
Pg 40: NYSE cumulative (5-day) A/D line rose; ratio of winners:losers 1+:1.
Pg 47: 4-wk moving average of net fund flows is now POSITIVE for stock, taxable bond, muni AND money-market funds (unusual, as if new money is coming into the market).
Pg 31, EUROPEAN TRADER. Porsche (POAHY; yield 4.54%; fwd P/E 20.6) is attractive in luxury-sports-car category. It was spun out of VW/VWAGY (still owns 75%) and both share some R&D and production facilities.
Pg 31, EMERGING MARKETS. TURKEY has had runaway inflation as it unconventionally eased monetary policy while inflation surged. It was a race for economic development to try to beat inflations – that rarely works. Lira has been trashed. Now, it has a terrible earthquake tragedy. Presidential elections are in June but can be delayed to March 2024; reelection of ERDOGAN is not in doubt. Be careful with volatile ETF TUR.
EXTRA. Higher-yielding EM debt has been hot (EMB, etc) and there have been strong inflows. The recent rebound has been stronger for sovereign EM debt; be careful with average spreads as they are distorted by some large spreads for lower-rated EMs. Be selective and beware that it may be late to jump into the EM debt bandwagon. (see also Income Investing, Part 2)
Pg 32, OPTIONS. RETIREES can use conservative CALL-WRITING to generate more income from their equity portfolios. Public education is necessary to highlight such noninstitutional aspects of options.
(SP500 VIX 20.02 (high), Nasdaq 100 VXN 25.82 (high), options SKEW 122.89, bond MOVE 110.11) (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 33, COMMODITIES. LUMBER has been very volatile, but it may get a boost if/when the HOUSING market picks up; despite short-term headwinds for housing, its long-term prospects are good. The US lumber market is affected by domestic as well as Canadian supplies. The lumber futures markets are thin.
Pg 45: An up week in EUROPE (France +2.89%, Norway -0.60%) and a down week in ASIA (Indonesia +0.73%, HK -2.77%).
TREASURY* 3-mo yield 4.84%, 1-yr 5.00%, 2-yr 4.60%, 5-yr 4.03%, 10-yr 3.82%, 30-yr 3.88%. REAL yields 5-yr 1.46%, 10-yr 1.41%, 30-yr 1.53%.
DOLLAR rose, ^DXY 103.88, +0.24% (pg 50). GOLD fell to $1,834, -1.4% (Handy & Harman spot, Thursday; pg 52); the gold-miners fell. (^XAU was at 117.64, -4.70% 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 4/6 datapoints in, the outlook for I-Bond rate on 5/1/23 is poor and it may be 1-2% 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 14: COVER STORY (Sustainable Investing), “Why the World Is Using More PLASTIC”. A glut of cheap new virgin plastic in consumer and industrial packaging is choking the recycling centers. The US fracking produces extra NATURAL GAS that is used for virgin plastic. The EMs are behind the developed countries in adopting the ESG agenda and several new plants for virgin plastics are coming on line. Recycled plastic (HDPE/PCR) cost 2.45x the virgin plastic. With high inflation, companies find it difficult to pass on higher costs of packaging with recycled plastics. BTW, recycled plastic PET used in some disposable items is cheap now due to supply/demand imbalances those will dissipate soon. Companies are trying to address this problem by using more recycled packaging (KO, MDLZ, NSRGY, PEP, UL, etc). Oil and petrochemical companies (XOM, SHEL; DOW, LYB, etc) are investing in recycling technologies and plants. Just 5-10% of plastic is now recycled, and the rest ends up in landfills somewhere in the world; many EM countries have stopped accepting ships loaded with garbage. The EU and 8 US states (CA, NY, etc) have banned single-use plastics for many items. Recyclable plastic containers show stylized TRIANGLES with numbers inside: 1-PET, 2-HDPE, 3-7-hard to recyclable plastics that should go into trash. (I checked several plastic bottles around the house and they have triangles to indicate recyclability but no numbers inside, so this must be new)
Pg 17: Petrochemical companies include DOW, LYB, CE, BERY, ORGN, UNVR.
Pg 7, UP AND DOWN WALL STREET. With stronger data on inflation, jobs, retail sales, the projections for fed fund futures are also creeping up, to 5.25-5.50% now. The FED is less likely to pause or cut sooner. This rebound led by speculative stocks has also cooled since February 2. A couple of Fed presidents are making noises about 50-bps hike. The Fed VC and Governor BRAINARD, a dove, is leaving for the NEC. It should be noted that while the Fed has been easing, the ECB (EU), BOJ (Japan), PCOB (China) have been easing, so there is net easing globally. This may be changing too. Expect bumpy times ahead for stocks and risk assets.
BONDS are now a decent alternative to stocks. T-Bill yields have jumped from near-zero to around 5% - and no risk or volatility if held to maturity. Also attractive are investment-grade corporates (LQD), short-term TIPS (5-yr TIPS, STIP, VTIP), short-term HY (SHYG, SJNK), healthcare REITs (LTC, MPW, OHI, SBRA). Be selective with MUNIS as they have run up. Avoid FR/BL if the economy worsens (strange, because these act as ST-HY at worst, but ST-HY are recommended).
Pg 7, STREETWISE. Whether there soft or hard landing, TURBULENCE is ahead for risk-assets. Despite the FED raising rates at the fastest pace in 40 years, INFLATION and JOBS measures remain stubbornly high. Look at 6-mo changes (vs 1-mo and 12-mo changes commonly reported). Only the INTEREST sensitive sectors of economy have slowed – goods, housing, purchases on credit; the service sector remains strong. Stock VALUATIONS are not cheap and there is more room for contraction than expansion. There is now competition from money-market funds, T-Bills/Notes, bonds. Specialized ETFs (equal-weight RSP; free cash flow COWZ, GCOW; SC-value VBR) may be better than broad-based market-cap indexes.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook (“at”yogibearbull), Twitter (“at”YBB_Finance).