January 15, 2025
What You Need to Know Today:
Will S&P 500 earnings continue to accelerate for the fourth quarter of 2024?
I continue to see this rally continuing through the fourth quarter of 2024vbefore faltering in the first quarter of 2025. That call does assume that we’ll get through today’s election and its aftermath with relatively little actual violence–protests in the streets from the losing side and lots of court cases, but no mass armed violence. And it assumes that projected earnings growth in the fourth quarter will live up to expectations and show the highest growth rate in all of 2024. No one knows what this post-election period will bring. So let’s move onto assumption #2: How likely is it that fourth quarter growth will hold up?
Is this the best the most bullish can do? A 3% upside for the S&P 500 by the end of the year?
On Friday, June 14, Goldman Sachs upped its year-end target for the Standard & Poor’s 500 to 5,600 points from 5,200. The idea closed at 5473 on Monday, June 17, for the 30th record high of 2024. Goldman’s forecast puts the investment company at the same expected price level as UBS Investment Bank and BMO Capital Markets. They’r talking about a roughly 3% gain from here through the end of the year. Three points to consider about the forecast.
Saw that coming, yes? China launches probe on EU pork imports
China has launched an anti-dumping probe on pork imports from the European Union. The move sure looks to me like retaliation for investigations launched by the EU into Chinese subsidies across a range of industries and will impose tariffs on electric car imports from July. The move isn’t small trotters. China is the EU’s biggest overseas market for pork. The trade was valued at $1.83 billion last yea
Saturday Night Quarterback (on a Sunday) says, For the week ahead expect…
I expect questions about animal spirits and their effect on the financial markets to step forward as the Federal Reserve stays on the sidelines and as election anxiety ratchets higher.
Buy the dollar! After Italy’s triumph leading this week’s G7, the country will cause another euro crisis
This is Giorgia Meloni’s time in the sun. I hope she enjoys it. The pasta is about to hit the fan. Which will lead the dollar to rally against the euro. Some more. And which gives me Step #6 in my Special Report: 7 Steps to Take Now to Protect Your Portfolio While You Still Reap Market Gains Step #6 in my strategy for protection and profit for the rest of 2024 is Buy the Invesco DB US Dollar Bullish ETF (UUP).
There’s drama in Fed’s decision not to change interest rates after all
To no one’s surprise, the Federal Reserve left its benchmark interest rate unchanged today, June 12, at a two-decade-high of 5.25% to 5.5%. But that doesn’t mean there wasn’t drama as a result of todays decision.
Special Report: 10 Contrarian Bargains to Buy Now–My second of 10 Picks is Nidec
Today, October 12, I’m making Nidec, the Japanese company that is the leader in the market for small electric motors and a growing presence in the market for motors and drive trains for electric vehicles, the second pick in my Special Report: 10 Contrarian Bargains to Buy Now.
Live Market Report (20 minute delay)
Tesla once again shows that it’s really, really bad at managing expectations and stock tumbles
Yesterday’s investors day could have been a huge positive that sent Tesla (TSLA) shares soaring today. Instead, because the company and its CEO Elon Musk once again over-promised and underdelivered, investors went away disappointed and today, March 2, the stock was down 5.85% at the close.
2 Fed interest rate hawks speak, stocks stutter
It’s not like we don’t know that these two Federal Reserve presidents favor higher interest rates for longer. But still hearing them say it did put a crinkle in stock prices today.
Please Watch My New YouTube Video: Will China Send the Global Economy Surging?
Today’s topic is Will China Send the Global Economy Surging? We’ll really know the answer to this starting on Sunday, when the National People’s Congress of China meets. The leaders of China will make some important decisions for the Congress to rubber-stamp. China is looking for a 5% or higher GDP growth this year after last year’s 3%, but in order to get there, they’ll have to stimulate the economy. Local governments are drowning in debt that they can’t pay, and the government’s usual stimulus plan of requiring local governments to borrow and then spend it on “infrastructure “, isn’t likely to work. There’s also added pressure to cut interest rates to stimulate the economy and the rising tide (albeit a very low tide) of disgruntlement of the government and Xi Jinping’s leadership throughout the Covid lockdowns and the subsequent deadly spread of Covid-19. All this while the population is aging dramatically (with little to no retirement infrastructure), following the one-child policy, which reduced the younger population drastically. To take advantage of the expected and necessary economic stimulus, I recommend the iShares China Large-Cap ETF (NYSEARCA: FX) which captures a lot of the state-owned and larger corporate companies that would likely benefit from a stimulus from China. You’ll  find it in my Perfect 5 ETF Portfolio.
China stocks up on better than expected manufacturing news, anticipation of People’s Congress–adding China to ETF portfolio today
China’s manufacturing activity recorded its highest monthly improvement in more than a decade in February, while services also showed stronger-than-expected performance. Home sales rose for the first time in 20 months. Which has helped push Chinese stocks higher–along with the belief that the annual People’s Congress meeting that begins on Sunday will produce new stimulus measures from the central government.
U.S. manufacturing sector continues slump in February
The seasonally adjusted S&P Global US Manufacturing Purchasing Managers’ Index was revised lower to 47.3 in February. That’s up from a 46.9 reading in January. But it’s still below the 50-level that separates expansion from contraction in this index.
Oil turns in eighth monthly drop in last nine months in February–but better times may be ahead
Oil prices fell again in February with crude dropping another $2 a barrel on the month. Crude prices really didn’t show much of a trend in February as worries over an economic slowdown caused by higher interest rates battled signs of tighter supply. The reading range for the month was the smallest since July 2021. Signs of increased demand from China and the continued bite of sanctions against Russia point to gains for oil in coming months.
Luminar makes good progress toward positive gross margins
Shares of Luminar Technologies (LAZR) closed up 6.23% Monday, February 27, added a another 0.91% during today’s regular session, and then fell 2.01% in after hours trading on the company’s announcement of substantial progress toward cash flow positive by the fourth quarter of 2023.
Does China’s debt crisis make a rate cut from the People’s Bank more likely?
The debt crisis at China’s local governments will be top of the agenda when China’s leaders gather in Beijing for the annual parliament next week.m (The nation’s legislators and top leaders meet from this Sunday to approve key economic targets for 2023, including a new local bond quota, the budget, and also monetary policy.) A majority of regional governments — at least 17 out of 31 — are facing a serious funding squeeze, with outstanding borrowing exceeding 120% of income in 2022
Investors really don’t want Pioneer Natural Resources to acquire another producer
On Friday, shares of Pioneer Natural Resources (PXD) fell on a Bloomberg story reporting rumored talks between the Permian Basin oil shale producer and Appalachian natural gas producer Range Resources (RRC). On Monday shares of Pioneer rebounded as the company denied that it was in acquisition talks. The lesson? Investors really don’t want Pioneer to spend money on acquiring more assets.
Watch My YouTube Video: Trend of the Week How Tired Is the Consumer?
This week’s Trend of the Week is How Tired Is the Consumer? Consumer spending makes up 70% of the economy, so if consumers get tired and start spending less, the economy as a whole will slow down. The current consumer data doesn’t look good. Credit card debt is at an all-time high and delinquency rates are up to 4%. On February 21, Walmart (NYSE: WMT) came out worried about the full year, noting that consumers were purchasing less-expensive goods, and lowered its guidance for 2023 below Wall Street expectations. However, the lowered guidance didn’t affect the stock price. Why? As consumers are looking more tired, investors will look for stocks like Walmart and Costco, where a consumer would go to substitute products with lower prices. If you’re looking to put some money somewhere if the consumer is looking tired, Costco (NASDAQ: COST), Wal-Mart (NYSE: WMT) and Dollar General (NYSE: DG) are good options. If you believe the consumer is REALLY tired, you may want to look to put your money somewhere outside of the market, like a CD with a 5% yield. For other 5% options, check out my recent post “The best way to get a 5% yield–my choices and their pluses and minuses”: https://www.jubakpicks.com/the-best-way-to-get-a-5-yield-my-choices-and-their-pluses-and-minuses/.
So much for a global plan to tackle climate change: China and India ramp up coal production and consumption
If the world is to stand any chance of avoiding a catastrophic increase in temperatures, the global economy has to move away–very quickly–from using fossil fuels, and especially coal, to generate electricity. Both China and India pledged at the 2021 Glasow COP26 global climate summit to phase down the use of coal and to reduce carbon emissions from their industrial sector. Pledges. Can’t eat ’em. Can’t use them to pay the bills. Turns out, you can’t even believe them.
Now stocks are a second half of 2023 story–the Bulls hope
Why hasn’t the stock market tumbled more in the wake of hotter-than-expected inflation numbers from both the Consumer Price Index (CPI) and the Personal Consumption Expenditures price index for January? It’s not because investors and traders are looking for a reversal of the bad inflation news when we get February data in early March. Nope. It’s because stock market bulls continue to believe that the Federal Reserve will stop raising interest rates soon enough to produce a rally in the second half of 2023.
There just isn’t a whole lot of fear in this stock market–at least in the short-term says the VIX
The so-called fear index, the CBOE S&P 500 Volatility Index (VIX), just isn’t very fearful right now. In spite of all the negative talk from Federal Reserve officials, Wall Street figures like JPMorgan Chase’s Jamie Dimon, and various and sundry economies, stocks just aren’t showing much fear right now. Oh, sure stocks fell this week but the VIX didn’t show any big rush to hedge downside risk
Saturday Night Quarterback says, For the week ahead expect…
For the week ahead, I’m expecting more slippage in the major stock market indexes. Because? Let’s face it–give me a reason, any reason, to put money to work in stocks ahead of the March 22 meeting of the Federal Reserve. On the upside there’s…well what is there?
The S&P 500 breaks below 4,000 turning support into overhead resistance again
Friday’s 1.05% retreat in the Standard & Poor’s 500 took the index down 42.28 points to 3,970.04. The cliche is that with a drop like this support–at 4,000–turns into resistance to the market moving higher. That’s a depressing thought to anyone who looks at a chart showing how long it took–and how many tries–before the index moved decisively above 4,000 on January 20, 2023.
PCE inflation picks up the pace in January; stocks stumble
The Personal Consumption Expenditures index, the Federal Reserve’s preferred inflation gauge, rose in January at its fastest pace since June. Consumer prices rose 0.6% from December to January, up sharply from a 0.2% increase from November to December, the Commerce Department reported on Friday, February 24. Year-over-year prices rose at a 5.4% rate, up from a 5.3% annual race in December. Core inflation, which excludes volatile energy and food prices, rose 0.6% from December, up from a 0.4% rise in December from Movember. Year-over-year core inflation was up 4.7% in January, versus a 4.6% year-over-year rate in December.
Please Watch My New YouTube Video: Quick Pick U.S. Natural Gas Fund
Today I posted my two-hundred-and-forty-first YouTube video: Quick Pick U.S. Natural Gas Fund Want to grow your portfolio and protect it too? In the toughest investing market in 40 years? Grab my eBook, Your Best Investing Strategy for the Next 5 Years: Free download for subscribers to JubakAM.com. Just click on the image in the right margin. Today’s Quick Pick is United States Natural Gas Fund (NYSEARCA: UNG). The chart for UNG is horrendous, with a peak in August and a steady plummet after that. For 2022, the stock was up about 12%, thanks to late summer surges in price, as natural gas was bid up under the expectation that the war in Ukraine and sanctions on Russia would cause Europe to run out of natural gas. But year to date for 2023, it’s down 44%, as Europe proved better at replacing Russian gas than anyone had expected. As the end of winter approaches, European natural gas stockpiles are at about 65%–above normal for this time of year. UNG has a pattern of up years following down years–in 2020 UNG saw a 43% decline, and in 2021, a 35% increase. As the price of natural gas goes down, demand spikes as buyers look for the cheapest fuels and purchase more natural gas, which sends the pendulum swinging back upward for natural gas providers and funds that track the commodity. Between now and mid-March is a good time to get in on natural gas as we look for the upswing when China and Asia start looking at cheaper natural gas prices and Europe looks to get its stockpile back to 100%.
Adding Pioneer Natural Resources to my Dividend Portfolio on 11% annual yield
Wednesday, February 22, Pioneer Natural Resources (PXD) reported better-than-expected adjusted earnings for the fourth quarter of 2022 while revenues came up short of Wall Street estimates. Revenue was still up 18% year-over-year to $5.1 billion. Fourth quarter net income nearly doubled to $1.48 billion or $5.98 share, from $763 million, or $2.97 a share, in the fourth quarter of 2021. The company declared a quarterly total dividend of $5.58/share, made up of a $1.10 base dividend and a $4.48 variable dividend. The total annualized dividend yield is approximately 11%.Which is why I’m adding the shares to my Dividend Portfolio today.
Intel cuts dividend by 66%, stock drops just 2.26% on the day
So it wasn’t much of a surprise to most investors–although some of us were hoping that Intel (INTC) would hold its dividend steady after a big bond offering in the last few weeks. But today Intel cuts its dividend by 66% to 12.5 cents a share from a prior 36.5 cents. The stock dropped only 2.26% on that big news.
Please Watch My YouTube Video: 6% Yes, 8% No
Today I posted my two-hundred-and-fortieth YouTube video: 6% Yes, 8% No. Today’s topic is: 6% Yes, 8% No. I’ve been saying that I think 6% is the peak for interest rate increases from the Federal Reserve this cycle. Inflation is not coming down as fast as the Fed would like and it’s going to have to keep raising rates until it can bring inflation down to an acceptable level. But what’s acceptable to the Fed? According to the Taylor Rule, which looks at unemployment to calculate where interest rates should be in order to control inflation, we’re heading toward 9% interest rates. I don’t think that’s going to happen in this cycle–not because the economics are wrong, but because the politics don’t work. Mohamed El-Erian recently argued that what is really needed is 8%, but if the Fed did that, he noted, it would cause a massive recession. Instead, he thinks the Fed will declare victory when inflation reaches 3% to 4%, (and we’re 4.5% to 5.5% now, depending on what inflation measure you choose). The idea is that the Fed will settle for a higher inflation rate and blame the green energy transition, geopolitical challenges, and changes in the labor market. Look for a 6% interest rate peak as a good buy point into this market.
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