Post by Admin/YBB on Dec 16, 2023 5:07:10 GMT -6
From Barron’s, December 18, 2023 (Part 1, Market Week+)
Pg 34, TRADER. BULLS have all-clear at least to the yearend. POWELL indicated rate cuts in 2024, but the market wants more. An everything-rally followed. The 10-yr yield fell below 4%, mortgage rates below 7%. Regional bank KRE had a spectacular rally. Stocks beyond Magnificent 7 also showed signs of life. Efforts by the NY Fed Prez WILLIAMS on CNBC on Friday to notch down expectations were useless. A bull was seen running on the commuter train tracks in Newark, NJ. Everything looks rosy and perfect for 2024 – lower inflation, moderate economic growth, possible rate cuts. What could go wrong? Some worry that rate cuts would indicate a weakening economy that may fall into recession. Monetary policy works with a lag, so one cannot be sure about the projections of soft landing. Investors should evaluate their asset allocations and consider shifting some money from leading sectors into lagging sectors.
After the FOMC on Wednesday, prospects for some BANKS changed dramatically. The ETFs bank KBE and regional bank KRE also rebounded strongly. Some bulls are scratching their heads wondering about the rebound in the worst performing bank stocks. But there is more upside once the dirt settles.
With the dealmaking rush (XOM + PXD, CVX + HES, OXY + CrownRock, etc) in the OIL patch, look for the next opportunities in ALL-streams, upstream (E&P), midstream (pipelines), downstream (refiners). Potential ACQUIRERS include DVN, FANG, MRO; potential TARGETS include PR, SWN, CIVI. The pie is shrinking, and big players want a piece of that pie to remain big. Deals so far have been with stocks and cash, but watch out when they are debt-based.
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.
FOMC 1/31/24+ hold (cycle peak 5.25-5.50%)
FOMC 3/20/24+ cut
FOMC 5/1/24+ cut
FOMC 6/12/24+ cut
FOMC 7/31/24+ cut
(Cuts in early-2024) (Probabilities for some rate-ranges aren’t high, so there can be some unexpected moves.) (Powell/Fed signaled pivot in 2024, but market expectations now are far ahead of the Fed.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +2.92% (new high), SP500 +2.49%, Nasdaq Comp +2.85%, R2000 +5.55% (huge). DJ Transports +5.29% (huge; Dow Theorists watching); DJ Utilities +0.90%. (Rotating spot Regional Bank KRE +8.10% (huge+)) US$ index (spot) -1.37% (remains too strong over 100), oil/WTI futures +0.28%, gold futures +1.14%.
YTD (index changes only), DJIA +12.54%, SP500 +22.91%, Nasdaq Comp +41.54%. (Rotating spot Regional Bank KRE -9.84%)
SENTIMENTS
(ALL sentiments are GOOD now. Crowds may be right sometimes. But watch for some Sentiments to reach extreme levels.)
NYSE cumulative (5-day) A/D LINE rose for a 5th week; ratio of winners:losers NA.
FUND INFLOWS +/OUTFLOWS - (4-weekMA) (NEW). Stocks +, taxable bonds -, munis +, money-market funds +.
AAII Bull-Bear Spread +32.0% (very high). (Thursday-Wednesday)
ybbpersonalfinance.proboards.com/thread/141/aaii-sentiment-survey-weekly?page=12&scrollTo=1285
%Above 50-dMA for NYSE-listed stocks 82.03% (overbought); (StockCharts $NYA50R for NYSE; $SPXA50R for the SP500 in the bottom panel),
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 78.3% (overbought); a proprietary index for %Above 75-dMA for selected 1,800 stocks that is published midweek but is updated by Barron’s only on late-Fridays (so, it typically LAGS). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
(Common Scale: oversold < 30, negative < 50, positive > 50, overbought > 70; note that Delta MSI itself uses all in/out using 50% neutral value, but the same graduated scale is used here for both sources of %Above.)
Pg 38, INTERNATIONAL TRADER. INDIA’s economy is booming. But its stocks have been among the most expensive among the EMs. Several Indian stocks are mentioned as attractive, and some trade in the US – HDB, IBN, LTOUF, etc; ETF is INDA.
Pg 39, OPTIONS. Big issues in 2024 will be the US elections, the Fed, and geopolitical events. Options will be helpful for hedging and income. There is a huge appetite for them as seen with the popularity of the giant options-writing ETF JEPI (AUM $30 billion). Unfortunately, exchanges and options investors are misdirecting lot of energy into the ODTE (1-day) options.
(SP500 VIX 12.28 (low), Nasdaq 100 VXN 15.47 (low), options SKEW 153.26 (high), bond MOVE 115.75 (Yahoo Finance data).
(Low VIX, high SKEW combo is a sign of nervous bulls)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 51: A good week in EUROPE (Netherlands +3.26%, Spain -1.58%) and a good week in ASIA (HK +5.34%, Singapore +0.34%).
TREASURY* 3-mo yield 5.44%, 1-yr 4.95%, 2-yr 4.44%, 5-yr 3.91%, 10-yr 3.91%, 30-yr 4.00%;
REAL yields 5-yr 1.74%, 10-yr 1.69%, 30-yr 1.82%;
FRNs Index** 5.33% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR fell, ^DXY 102.59, -1.5% (pg 58). GOLD rose to $2,020, +1% (Handy & Harman spot, Thursday; pg 61); the gold-miners rallied. (^XAU was at 123.76, +4.80% for the week)
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
US SAVINGS I-Bonds**, NEW rate from November 1, 2023, is 5.27%; the fixed rate is +1.30%, the semiannual inflation is +1.97%.
(NOTE – The Social Security COLA for 2024, based on the Q3 average of CPI-W, is +3.2%)
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS)
www.treasurydirect.gov/auctions/announcements-data-results/frn-daily/
www.treasurydirect.gov/marketable-securities/
***For local rates www.depositaccounts.com/banks/rates-map/
(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, “Stocks Beat the Odds This Year. Why They Can Do It Again in 2024”. A year that wasn’t to be was! AI, stronger ECONOMY and JOB market led the rally in big stocks, especially the big techs (Magnificent 7). The SP500 at fwd P/E 19 isn’t cheap. It’s unclear when the rate cuts will start. There are geopolitical crises and uncertainties about the US elections. 6 strategists* provide 2024 projections: SP500 4,500-5,400, EPS $229-250; 10-yr 3.5-4.3%; fed funds 4.25-4.50% to 5.00-5.25%. If we see better earnings and lower rates, those will be huge positives. But 2024 could also be rocky and volatile, especially H1; VIX won’t stay low. Fixed-income will remain attractive and extending maturities will pay off. Quality-stocks should do well (QUAL); healthcare sector may rebound (XLV); cyclicals should also be strong (without recession). Position ahead for 2024 because things will move fast. *CHAUDHURI/iShares/BLK, HARVEY/WFC, KOSTIN/GS, MALIK/Nuveen/TIAA, WILSON/MS (he has been found), YARDENI/Yardeni.
Pg 22: Barron’s 10 Favorites for 2024 (in excitement, the copywriter(s) put 2025): BABA, BNTX, BRK-A/B, CVX, GOOGL, GOLD, HTZ, MSGS, PEP, UHAL-B.
Pg 7, UP AND DOWN WALL STREET. With such high expectations for a perfect 2024, Felix ZULAUF (also called permabear by some) urges caution. It could be a volatile year with new highs and sharp selloffs. The FED-PIVOT is sometime in 2024. But the decline in rates may be limited, possibly 10-yr to 3.7% (after the FOMC on Wednesday, it is already around 3.9%). There are so many unknowns – economy, inflation, weak real estate (US), geopolitics (are investors prepared for a 3rd global crisis?). Stock leadership may change from big tech to cyclicals, and such changes are often violent. The indexing fashion has amplified 1970’s Nifty Fifty mania to just Magnificent 7 – 62% of the global capital flows into the US market, and 30% of that flows into the Magnificent 7. The world economy as a whole will be stagnant in 2024, with slowdown/recession in Europe, Japan, China. There are some bright spots – Mexico (EWW) that has been a huge beneficiary or near/reshoring (US) (INDIA is mentioned in International Trader, Part 1). Before 2023, Zulauf’s view was also negative for 2023, but the regional banking crisis in early-2023 caused the US to inject huge liquidity into the system. Markets may have front-run the expectations of rate cuts so much that they may be disappointed when the actual rate cuts happen. He recommends caution, having dry powder ready for selloffs, but for now fastening seat belts for a bumpy ride.
Who to pay attention to at the FED? There are so many open-mouths (“O” and “M” in FOMC, some say). POWELL revealed that the FOMC discussed cutting rates in 2024, and dot-plots indicated that. The 10-yr yield fell to 3.9% (it peaked at 5% on 10/23/23) and bonds rallied; stocks rallied too. The NY Fed Prez WILLIAMS went on CNBC on Friday to tame expectations. Economists have noted that unemployment rate is 3.7%, core CPI 4.0%, and if core CPI > unemployment rate in 2024, rate cuts would be inflationary. Some say that the Fed just wanted to shift market expectations to the easing mode, and that may also help with the upcoming Treasury refinancing.
Pg 11, STREETWISE. For 2024, buy Amazon/AMZN. It has P/FCF 40, but high valuation hasn’t been an issue in the past. 56 of 57 analysts have buy recommendations. It’s among the top 2024 picks by JPM. Its online retail and AWS cloud operations are growing in double digits. Its market-cap is only $1.5 trillion. Its capex is huge but may slow down at some point. In 3 years, its free cash flow may rival those of MSFT, AAPL, Saudi Aramco. It may start paying dividends someday. (For a reluctant decision maker, author Hough has tried to make this piece as realistic with humor as possible.)
High rates haven’t been kind to the solar industry, especially the battery makers. But now BoA is recommending FLNC as a great turnaround opportunity.
(EXTRAS from online Friday that didn’t make the weekend paper version)
See Column Topics. It seems some consolidation/rearrangement of Columns is going on.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
Pg 34, TRADER. BULLS have all-clear at least to the yearend. POWELL indicated rate cuts in 2024, but the market wants more. An everything-rally followed. The 10-yr yield fell below 4%, mortgage rates below 7%. Regional bank KRE had a spectacular rally. Stocks beyond Magnificent 7 also showed signs of life. Efforts by the NY Fed Prez WILLIAMS on CNBC on Friday to notch down expectations were useless. A bull was seen running on the commuter train tracks in Newark, NJ. Everything looks rosy and perfect for 2024 – lower inflation, moderate economic growth, possible rate cuts. What could go wrong? Some worry that rate cuts would indicate a weakening economy that may fall into recession. Monetary policy works with a lag, so one cannot be sure about the projections of soft landing. Investors should evaluate their asset allocations and consider shifting some money from leading sectors into lagging sectors.
After the FOMC on Wednesday, prospects for some BANKS changed dramatically. The ETFs bank KBE and regional bank KRE also rebounded strongly. Some bulls are scratching their heads wondering about the rebound in the worst performing bank stocks. But there is more upside once the dirt settles.
With the dealmaking rush (XOM + PXD, CVX + HES, OXY + CrownRock, etc) in the OIL patch, look for the next opportunities in ALL-streams, upstream (E&P), midstream (pipelines), downstream (refiners). Potential ACQUIRERS include DVN, FANG, MRO; potential TARGETS include PR, SWN, CIVI. The pie is shrinking, and big players want a piece of that pie to remain big. Deals so far have been with stocks and cash, but watch out when they are debt-based.
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.
FOMC 1/31/24+ hold (cycle peak 5.25-5.50%)
FOMC 3/20/24+ cut
FOMC 5/1/24+ cut
FOMC 6/12/24+ cut
FOMC 7/31/24+ cut
(Cuts in early-2024) (Probabilities for some rate-ranges aren’t high, so there can be some unexpected moves.) (Powell/Fed signaled pivot in 2024, but market expectations now are far ahead of the Fed.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +2.92% (new high), SP500 +2.49%, Nasdaq Comp +2.85%, R2000 +5.55% (huge). DJ Transports +5.29% (huge; Dow Theorists watching); DJ Utilities +0.90%. (Rotating spot Regional Bank KRE +8.10% (huge+)) US$ index (spot) -1.37% (remains too strong over 100), oil/WTI futures +0.28%, gold futures +1.14%.
YTD (index changes only), DJIA +12.54%, SP500 +22.91%, Nasdaq Comp +41.54%. (Rotating spot Regional Bank KRE -9.84%)
SENTIMENTS
(ALL sentiments are GOOD now. Crowds may be right sometimes. But watch for some Sentiments to reach extreme levels.)
NYSE cumulative (5-day) A/D LINE rose for a 5th week; ratio of winners:losers NA.
FUND INFLOWS +/OUTFLOWS - (4-weekMA) (NEW). Stocks +, taxable bonds -, munis +, money-market funds +.
AAII Bull-Bear Spread +32.0% (very high). (Thursday-Wednesday)
ybbpersonalfinance.proboards.com/thread/141/aaii-sentiment-survey-weekly?page=12&scrollTo=1285
%Above 50-dMA for NYSE-listed stocks 82.03% (overbought); (StockCharts $NYA50R for NYSE; $SPXA50R for the SP500 in the bottom panel),
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 78.3% (overbought); a proprietary index for %Above 75-dMA for selected 1,800 stocks that is published midweek but is updated by Barron’s only on late-Fridays (so, it typically LAGS). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
(Common Scale: oversold < 30, negative < 50, positive > 50, overbought > 70; note that Delta MSI itself uses all in/out using 50% neutral value, but the same graduated scale is used here for both sources of %Above.)
Pg 38, INTERNATIONAL TRADER. INDIA’s economy is booming. But its stocks have been among the most expensive among the EMs. Several Indian stocks are mentioned as attractive, and some trade in the US – HDB, IBN, LTOUF, etc; ETF is INDA.
Pg 39, OPTIONS. Big issues in 2024 will be the US elections, the Fed, and geopolitical events. Options will be helpful for hedging and income. There is a huge appetite for them as seen with the popularity of the giant options-writing ETF JEPI (AUM $30 billion). Unfortunately, exchanges and options investors are misdirecting lot of energy into the ODTE (1-day) options.
(SP500 VIX 12.28 (low), Nasdaq 100 VXN 15.47 (low), options SKEW 153.26 (high), bond MOVE 115.75 (Yahoo Finance data).
(Low VIX, high SKEW combo is a sign of nervous bulls)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 51: A good week in EUROPE (Netherlands +3.26%, Spain -1.58%) and a good week in ASIA (HK +5.34%, Singapore +0.34%).
TREASURY* 3-mo yield 5.44%, 1-yr 4.95%, 2-yr 4.44%, 5-yr 3.91%, 10-yr 3.91%, 30-yr 4.00%;
REAL yields 5-yr 1.74%, 10-yr 1.69%, 30-yr 1.82%;
FRNs Index** 5.33% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR fell, ^DXY 102.59, -1.5% (pg 58). GOLD rose to $2,020, +1% (Handy & Harman spot, Thursday; pg 61); the gold-miners rallied. (^XAU was at 123.76, +4.80% for the week)
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
US SAVINGS I-Bonds**, NEW rate from November 1, 2023, is 5.27%; the fixed rate is +1.30%, the semiannual inflation is +1.97%.
(NOTE – The Social Security COLA for 2024, based on the Q3 average of CPI-W, is +3.2%)
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS)
www.treasurydirect.gov/auctions/announcements-data-results/frn-daily/
www.treasurydirect.gov/marketable-securities/
***For local rates www.depositaccounts.com/banks/rates-map/
(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, “Stocks Beat the Odds This Year. Why They Can Do It Again in 2024”. A year that wasn’t to be was! AI, stronger ECONOMY and JOB market led the rally in big stocks, especially the big techs (Magnificent 7). The SP500 at fwd P/E 19 isn’t cheap. It’s unclear when the rate cuts will start. There are geopolitical crises and uncertainties about the US elections. 6 strategists* provide 2024 projections: SP500 4,500-5,400, EPS $229-250; 10-yr 3.5-4.3%; fed funds 4.25-4.50% to 5.00-5.25%. If we see better earnings and lower rates, those will be huge positives. But 2024 could also be rocky and volatile, especially H1; VIX won’t stay low. Fixed-income will remain attractive and extending maturities will pay off. Quality-stocks should do well (QUAL); healthcare sector may rebound (XLV); cyclicals should also be strong (without recession). Position ahead for 2024 because things will move fast. *CHAUDHURI/iShares/BLK, HARVEY/WFC, KOSTIN/GS, MALIK/Nuveen/TIAA, WILSON/MS (he has been found), YARDENI/Yardeni.
Pg 22: Barron’s 10 Favorites for 2024 (in excitement, the copywriter(s) put 2025): BABA, BNTX, BRK-A/B, CVX, GOOGL, GOLD, HTZ, MSGS, PEP, UHAL-B.
Pg 7, UP AND DOWN WALL STREET. With such high expectations for a perfect 2024, Felix ZULAUF (also called permabear by some) urges caution. It could be a volatile year with new highs and sharp selloffs. The FED-PIVOT is sometime in 2024. But the decline in rates may be limited, possibly 10-yr to 3.7% (after the FOMC on Wednesday, it is already around 3.9%). There are so many unknowns – economy, inflation, weak real estate (US), geopolitics (are investors prepared for a 3rd global crisis?). Stock leadership may change from big tech to cyclicals, and such changes are often violent. The indexing fashion has amplified 1970’s Nifty Fifty mania to just Magnificent 7 – 62% of the global capital flows into the US market, and 30% of that flows into the Magnificent 7. The world economy as a whole will be stagnant in 2024, with slowdown/recession in Europe, Japan, China. There are some bright spots – Mexico (EWW) that has been a huge beneficiary or near/reshoring (US) (INDIA is mentioned in International Trader, Part 1). Before 2023, Zulauf’s view was also negative for 2023, but the regional banking crisis in early-2023 caused the US to inject huge liquidity into the system. Markets may have front-run the expectations of rate cuts so much that they may be disappointed when the actual rate cuts happen. He recommends caution, having dry powder ready for selloffs, but for now fastening seat belts for a bumpy ride.
Who to pay attention to at the FED? There are so many open-mouths (“O” and “M” in FOMC, some say). POWELL revealed that the FOMC discussed cutting rates in 2024, and dot-plots indicated that. The 10-yr yield fell to 3.9% (it peaked at 5% on 10/23/23) and bonds rallied; stocks rallied too. The NY Fed Prez WILLIAMS went on CNBC on Friday to tame expectations. Economists have noted that unemployment rate is 3.7%, core CPI 4.0%, and if core CPI > unemployment rate in 2024, rate cuts would be inflationary. Some say that the Fed just wanted to shift market expectations to the easing mode, and that may also help with the upcoming Treasury refinancing.
Pg 11, STREETWISE. For 2024, buy Amazon/AMZN. It has P/FCF 40, but high valuation hasn’t been an issue in the past. 56 of 57 analysts have buy recommendations. It’s among the top 2024 picks by JPM. Its online retail and AWS cloud operations are growing in double digits. Its market-cap is only $1.5 trillion. Its capex is huge but may slow down at some point. In 3 years, its free cash flow may rival those of MSFT, AAPL, Saudi Aramco. It may start paying dividends someday. (For a reluctant decision maker, author Hough has tried to make this piece as realistic with humor as possible.)
High rates haven’t been kind to the solar industry, especially the battery makers. But now BoA is recommending FLNC as a great turnaround opportunity.
(EXTRAS from online Friday that didn’t make the weekend paper version)
See Column Topics. It seems some consolidation/rearrangement of Columns is going on.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).