Morning Briefing
July 22, 2022 | Daily JAM, Morning Briefing |
Today I’m adding shares of the ProShares Short Russell 2000 ETF (RWM) to my Volatility Portfolio on the belief that the bounce of the last week is over ahead of the Federal Reserve’s July 27 meeting. I expect that the central bank will raise interest rates by 75 basis points at that meeting (although a 100-basis-point increase remains an outside possibility.) A 75-basis-point increase, far larger than the Fed’s standard 2-basis-point hike or even the “we’re serious” 50-basis-point increase, will be an admission that the central bank doesn’t think inflation is under control. And I further think the Fed will say something to the effect of “Inflation remains stubbornly high.
Those two pieces will be enough to revive fears that the Federal Reserve will raise interest rates further in 2022 and is likely to produce a recession sooner rather than later. I’m using the Russell 2000 small cap index as my volatility vehicle here because this index tends to be the most sensitive of the major indexes to shifts in investor sentiment. And I’d therefore expect the biggest reaction to a revival of recession fears from the Russell 20000.
July 21, 2022 | Daily JAM, Morning Briefing, Top 50 Stocks, Volatility |
In the last week Technology stocks, and chip stocks in particular, have staged a very impressive rally off of a really low base. Nvidia (NVDA), for example, is up 17.43% in the week that ended on July 21. That still leaves the stock down 39.43% for the year. Advanced Micro Devices (AMD) is up 15.36% in the last week. And it’s still down 37.85% for 2022. Qualcomm (QCOM) is up 1.85% for the week. And down 16.26% for the year. Impressive. But I’d be more inclined to see this as a sustainable rally if stocks were rising across the board–with tech and chips leading the way, perhaps.
Instead what I’m seeing is a rotation from safe and less risky stocks
July 20, 2022 | Daily JAM, Morning Briefing |
Yesterday I wrote about how Bank of America’s monthly fund manager pointed to investor capitulation in the ongoing Bear Market. Today, strategists at Sanford C. Bernstein disagreed. “We have not yet seen capitulation in outflows from equity funds.”
July 19, 2022 | Daily JAM, Morning Briefing |
This morning the Bureau of Labor Statistics released figures for weekly earnings for full-time workers in the second quarter. Median weekly earnings of the nation’s 118.9 million full-time wage and salary workers were $1,041 in the second quarter of 2022. That was 5.2% higher than a year ago. But below the 8.6% inflation rate during the period.
July 18, 2022 | Daily JAM, Morning Briefing |
I sure hope President Joe Biden got a T-shirt from this recent trip to Saudi Arabia. You know the kind. One that says, “I went to Saudi Arabia and all I got was this lousy t-shirt.” Because he sure didn’t get a deal for increased oil production from the Saudis.
July 15, 2022 | Daily JAM, Morning Briefing |
China’s economy grew at just a 0.4% rate in the June quarter. Thanks to a Pandemic lockdown that covered 350 million people, China’s GDP grew at the second lowest rate ever recorded. The numbers mean that China will miss its GDP growth target of 5.5% a year by a big margin. Goldman Sachs cut its forecast to 3.3% growth for the year.
July 14, 2022 | Daily JAM, Morning Briefing |
After Wednesday’s report that CPI inflation hit an annual 9.1% rate in June, a 100-basis-point interest rate increase at the Federal Reserve’s July 27 meeting is on the table. (Which is literally what Atlanta Fed President Raphael Bostic told reporters yesterday: “Everything is in play,” he said. Asked if that included raising rates by a full percentage point, he replied, “It would mean everything.)
July 13, 2022 | Daily JAM, Morning Briefing |
It’s not the kind of historical comparison you want to hear. Inflation, as measured by the Consumer Price Index (CPI rose at a 9.1% annual rate in June. That was the highest annual rate since November 1981. (Just as the Volcker Fed was raising interest rates to 14% to finally break inflation.) Economists had been expecting inflation of 8.8%. Which would still have been an increase from May’s 8.6% headline rate.
July 11, 2022 | Daily JAM, Morning Briefing |
China’s stocks took a beating today, July 11, on worries that the country is headed for a replay of the Pandemic lockdowns that battered the country’s economy earlier this year. In Shanghai, the flash point in the lockdown that ended just 5 weeks ago, the Covid case-load continued to march high. The city reported 59 new infections on Monday, the fourth day in a row with case numbers above 50. The sharp rise from single digits about a week ago follows the detection of the more contagious BA.5 sub-strain of the omicron variant. Nationally, close to 30 million people, are under some form of movement restriction. In Macao, state regulators moved to close all casinos for the first time since the early stages of the pandemic.
July 8, 2022 | Daily JAM, Morning Briefing |
The U.S. economy added 372,000 jobs in June. That was way above the expectations among economists surveyed by Bloomberg for 268,000 new jobs. And it was only slightly fewer than the 384,000 jobs (revised) added in May. The unemployment rate stayed steady at 3.6% in June. That was in line with expectations and with the 3.6% rate in May. Average hourly earnings climbed 0.3% month-over-month. That was on expectations but a slight dip from the 0.4% month-over-month gain in May. Average hourly earnings were up 5.1% year over year in June. That’s slightly higher than the expected 5.0% rate and slightly below the 5.3% annual rate in May. The data is good news for those on Wall Street still hoping for a soft landing for the economy
July 7, 2022 | Daily JAM, Morning Briefing |
The market is in the processing of pricing in a recession that’s either here or close to arrival. And now the big question is whether the Federal Reserve has the will to take a longer recession to get inflation under control or will begin cutting interest rates in early 2023.
July 6, 2022 | Daily JAM, Morning Briefing |
In my opinion, this was the most important statement in the minutes from the Federal Reserve’s June meeting released today: Fed officials “recognized that policy firming could slow the pace of economic growth for a time, but they saw the return of inflation to 2% as critical to achieving maximum employment on a sustained basis.” Nothing guaranteed but the Jerome Powell Fed, commonly regarded on Wall Street as having no stomach for a recession, was signaling that it would continue to increase interest rates until it brought inflation under control even at the cost of a recession. That’s important because the current market consensus is predicated on the Fed quickly backing off on interest rate increases face of a recession. Recession soon, perhaps this quarter or the next, but then interest rate cuts in early 2023, the current story goes.
