Morning Briefing
January 6, 2023 | Daily JAM, Morning Briefing |
At the close today, the Standard & Poor’s 500 was up 20.28% to 3903. The Dow Jones Industrial Average had added 2.12%. The NASDAQ Composite was higher by 2.56% and the NASDAQ 100 was ahead 2.78%. All this on the heels of a December jobs report from the Bureau of Labor Standards that showed the economy added 223.000 jobs in December. (Economists had projected 202,000 jobs.) And on greater than-expected moderation in the pace of wage gains. Average hourly earnings climbed 0.3% month over month against expectations for a gain of 0.4%. Average hourly earnings rose 4.6% year over year against an expected 5.0% increase.
January 4, 2023 | Daily JAM, Morning Briefing |
Minutes from the Federal Reserve’s December 14 meeting stressed the central bank’s commitment to bring inflation down to the target 2% even at the cost of a recession. Although the financial markets were thinking about the Fed beginning to cut interest rates in the second half of 2023, nothing in the minutes pointed to that likelihood. And in fact, the Fed went out of its way to say that financial markets were underestimating the length of time remaining in this cycle of higher interest rates.
January 2, 2023 | Daily JAM, Morning Briefing |
It’s deja vu all over again as New York stock markets reopen for trading tomorrow.
We ended 2022 waiting for the monthly jobs report from the Labor Department to tell us when slower job growth would signal the potential end to the Federal Reserve’s cycle of interest rate increases. And we’re beginning 2023 the same way. The Labor Department will release the jobs report for December on Friday at 8:30 a.m. New York time. Economists surveyed by Bloomberg are projecting that the economy added 200,000 jobs in the month.That would be a strong but not too strong figure that’s unlikely to provide much clarity on the temperature of the jobs market or Federal Reserve policy. That’s especially true because the December jobs report is subject to significant seasonal error because government statisticians struggle to figure out how to adjust the data for seasonal holiday hiring. The Friday report will be preceded this week by the Job Openings and Labor Turnover Survey (or JOLTS report), ADP’s private payrolls data, and the Challenger Job Cuts report.
December 30, 2022 | Daily JAM, Morning Briefing |
The big investing and economic question for 2023 is How hard will it be to push inflation to something near the Federal Reserve’s 2% target? The answer will determine (at least until rising unemployment gets the Fed to blink in the second half of 2023) how far and how fast the Federal Reserve will have to raise interest rates, how big a danger a true recession is, and how much of a slowdown we’ll see in economic growth and corporate profits? And the answers to those questions will largely determine the direction of the stock market in 2023. I’d like to offer two of my own observations from my personal Christmas shopping season free of charge to those economists who are now grappling with these questions. My personal experience says that inflation will be stickier than the consensus on Wall Street now believes. And that it will be very, very hard to push inflation back to the Fed’s target range without a true recession.
December 29, 2022 | Daily JAM, Morning Briefing |
What we know about viruses says that they mutate faster when a virus has a huge pool of infected hosts where the virus is busy replicating away. From that perspective, the collapse of China’s 0-Covid containment policy has turned the country into a huge 1.5-billion-person petri dish. With infections climbing rapidly, the coronavirus has plenty of opportunity to mutate into new variants. At this point, it’s clear that China’s new surge of infection is going to be a disaster for China. Experts from outside China put the likely death toll at 1 million or more, and the country’s healthcare system is reeling toward a complete breakdown. This isn’t good news for the Chinese economy or China stocks and my advice is to sell stocks with exposure to China. In the last few days, I’ve sold MGM Resorts International (MGM) and Volkswagen (VWAPY) out of my online portfolios. But how big a danger does the Covid outbreak in China pose to the rest of the world?
December 27, 2022 | Daily JAM, Morning Briefing |
As of 2:30 p.m. New York time today, December 27, shares of Tesla (TSLA) were down 8.59%. Domestic Chinese electric vehicle maker NIO (NIO) was down 8.71%. The problem for both companies? The new wave of Covid has cut demand in the Chinese market and forced the shutdown of production at the companies’ factories.
December 26, 2022 | Daily JAM, Morning Briefing |
I vote for the latter–even though I acknowledge that the VIX, the CBOE S&P Volatility Index (VIX), which is supposed to track expectations for short-term volatility in the market, is behaving very strangely lately. The VIX is supposed to climb along with fear in the market as investors and traders step up to buy options and futures, even at higher prices, in order to hedge risk. But even as stocks have struggled in December the VIX has tumbled. It was down another 5.01% today to just 20.87.
December 23, 2022 | Daily JAM, Morning Briefing, Videos, VIX, Volatility |
Today I posted my two-hundred-and-nineteenth YouTube video: Fear Is Still on a Holiday Today’s topic: Fear is Still on a Holiday. This is a peculiar market for many reasons. Stocks are sinking, but volatility fear doesn’t seem to be rising. On December 20, for example, the S&P 500 fighting a 5-day losing streak. Havens of safety were getting smaller. Pharmaceuticals and airlines, which have been strong recently, sold off on December 19. Searching for glimpses of green, like Coke (up just .14%) in a sea of red is getting harder and harder. What’s curious though, is the VIX, the CBOE Volatility Index, better known as the “Fear Index” remains on the average to low end of its recent and historic range. their recent range. The VIX tracks prices for options and futures on the S&P, so as people, in fear of a downturn, hedge by buying “insurance” against a market drop, the VIX rises. But right now we’re seeing a market that truly stinks–that’s a technical term, I know, but you can Google it–while the VIX remains low, showing little sign of fear. My explanation is that at the end of the year, investors aren’t looking to hedge against a market they still hope will turn around. The VIX is an interesting short-term play here. Buying a Call option with a 60-day out as the market returns to fear, or rationality, in 2023 could be the way to go. I’m going to check on the up-to-the-minute price action and see if the Call option is attractive here. Look to my paid JubakAM.com and my free JubakPicks.Com sites on Friday for a buy or not.
December 21, 2022 | Daily JAM, MGM, Morning Briefing, VWAPY |
After swiftly abandoning its 0-Covid lockdown policy–without replacing it with anything resembling a national Covid protocol–China is facing a Covid disaster that could see more than 1 million deaths from the coronavirus in 2023. That would put China’s death toll from the Pandemic on par with that of the United States, which has seen 1.1 million people die from Covid19 since the pandemic began. The magnitude of the disaster is actually understated by that comparison since China’s comparable death toll would be condensed into a much shorter period than that in the United States. We don’t know with any degree of precision what a pandemic outbreak like this would do to the economies of China and the world. But we can make some reasonable guesses.
December 19, 2022 | Daily JAM, Morning Briefing |
Overnight China has gone from having the world’s most restrictive Covid policy–0-Covid citywide lockdowns at the slightest sign of the virus–to no Covid policy at all. And the predictable result is a wave of infection that virus models predict could produce at least 1 million Covid deaths in 2023.
December 16, 2022 | Daily JAM, Morning Briefing, NVDA, Top 50 Stocks |
Wall Street analysts had begun to cut earnings estimates for 2023 even before this week’s Federal Reserve meeting. The Fed’s signal that it would raise interest rates higher and for longer than anticipated–and Fed chair Jerome Powell’s very tepid support for the belief that there wouldn’t be a recession in 2023, is leading Wall Street analysts to cut forecasts again. I mean how great will revenue and earnings growth be in 2023 if the economy grows at the Fed’s projected 0.5%? And a big chunk of that thinking on Wall Street is asking now if that projection isn’t the optimistic end of a range that on the downside would put the U.S. economy into an actual recession. Which puts downward pressure on stock prices and makes it very difficult right now to put a fair value on any stock. The Standard & Poor’s 500 closed down another 1.11% today, December 16. The Dow Jone Industrial Average was off 0.85%. The NASDAQ Composite closed lower by 0.97%. And the NASDAQ 100 ended down 0.63%. Take a look at how this works for a stock such as Nvidia (NVDA).
December 15, 2022 | Daily JAM, Morning Briefing |
Yesterday, Fed chair Jerome Powell in his post-Fed-meeting press conference said that a recession in 2023 isn’t inevitable. Growth will stay positive next year, he continued, although “it’s not going to feel like a boom.” How much isn’t it going to feel like a boom? The Fed’s Dot Plot projections, updated for this meeting, predict 0.5% growth in U.S. GDP for 2023. That’s down from the 1.2% growth projected in the September Dot Plot. In 2024, the Fed said, growth will speed up to 1.6%, still not exactly a boom. In September the Fed projected 1.7% growth for 2024. And it will feel like a recession to many people.
