January 20, 2023 | Daily JAM, Morning Briefing |
This may seem perplexing: Alphabet (AKA Google) announced that it would cut 12,000 jobs just days after Microsoft (MSFT) said it would cut 10,000 jobs. And stocks, especially technology stocks, rallied. The Standard & Poor’s 500 closed up 1.89% today and the Dow Jones Industrial Average ended the day up an even 1.00%. The technology-heavy NASDAQ Composite finished up 2.66% and the NASDAQ 100 wound up climbing 2.86%. But remember that the economy doesn’t equal the stock market
January 19, 2023 | Daily JAM, Perfect Five-ETFs, Videos, Volatility |
Today I posted my two-hundred-and-twenty-sixth YouTube video: Quick Pick Sell UUP. This week’s Quick Pick: Sell UUP–the dollar ETF. I had the Invesco DB US Dollar Index Bullish Fund (NYSEARCA: UUP) in my portfolio through 2022 while the dollar was doing well but the dollar has recently taken a turn South and I’m now saying: Sell. UUP was going up while expectations were that the Fed was going to continue to raise interest rates, but now that the market believes (rightly or wrongly) that the Fed will be slowing their rate hikes, we’ve seen it move down by about 1.22% for 2023. This will likely continue to be the case as other countries maintain steady interest rates or even raise them to fight inflation (Watch the European Union) and as we edge closer to the debt ceiling cliff. U.S. Secretary of the Treasury, Janet Yellen thinks the government can shift things to cover us through June, but after that, if the debt ceiling isn’t raised by Congress, the United States will not be able to borrow enough money to meet all of its obligations. I think we’ll walk right up to that cliff, but I sincerely hope we don’t go over it. For now, I’m selling UUP and I’ll be looking for a gold ETF to replace it. More on that to come!
January 16, 2023 | Daily JAM, Videos |
This week’s Trend of the Week: Beyond 5%. On Monday, January 9, it looked like the market was going up until Raphael Bostic (head of the Atlanta Fed) and Mary Daly, (head of the San Francisco Fed) came out saying that Fed rates may have to be raised to above 5%. Unsurprisingly, this stopped the rally in its tracks. On Tuesday, January 10, the theme of “beyond 5%” continued with Jamie Dimon, CEO of JP Morgan Chase, reiterating the idea of a 50% chance of rate increases that took the peak up to 6%. The market consensus has comfortably settled on a 5% peak, but the idea of a possible rise to 6% is starting to percolate through the market. I’m still looking for a bottom in this market in mid to late 2023. Turmoil in Congress over the debt ceiling could push that out a bit further.
January 12, 2023 | Daily JAM, Morning Briefing |
Inflation, measured by the headline CPI (Consumer Price Index) fell 0.1% in December versus November. That brought the annual headline inflation rate to 6.5%. That was exactly what a consensus of economists was looking for. The core DPI, which strips out more volatile food and energy prices, rose by 0.3% in December from November. That brought the annual core inflation rate to 5.7%. Again, exactly what economists had forecast. (Remember, the inflation rate peaked at 9.1% this summer.) The stock market didn’t know quite what to do with this inflation reading, however.
January 11, 2023 | Daily JAM, Morning Briefing |
Let’s be honest, everybody from the experts down to you at your home computer is flying blind right now. Trends are so event dependent that I’m not sure there actually is a trend that’s worth buying into for more than a day or two. This will all resolve itself one day–I’d estimate by the middle of 2023–but until then my advice is to NOT get caught up in any of the waves of conflicting short-term sentiment rolling through the market.
January 10, 2023 | Daily JAM, Morning Briefing |
Despite comments from the head of the Atlanta and San Francisco Federal Reserve Banks that peak interest rates may need to go above 5%; despite comments from Federal Reserve chair Jerome Powell that fighting inflation may require unpopular interest rate moves; and even despite comments from JPMorgan Chase CEO Jamie Dimon that there’s a 50% chance that the peak rate may need to climb above 6%, the financial markets are clinging to a belief that interest rate increases will top out at no higher than 5%.
January 8, 2023 | Daily JAM, Morning Briefing |
On Thursday, before the New York market opens, the Bureau of Labor Statistics will report CPI inflation for December. This report will be the last before the Federal Reserve meets to set interest rates on February 1. The Fed already knows what the report says about inflation, but financial markets will react as if this new CPI inflation data will make the difference between a 50 basis-point increase (in line with the 50 basis-point increase on December 14) or will see the central bank send a positive signal on inflation and interest rates by slowing to a 25 basis-point increase. Right now the CME FedWatch Tool says the Fed Funds market is pricing in 86.6% odds of a 25- basis -point move and just 23.4% odds of a 50-basis-point 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 4, 2023 | Daily JAM |
Late in December, the Bank of Japan announced, unexpectedly, that it was adjusting its policy for buying bonds. Even something as vague as that is enough to rattle financial markets because Japan is the world’s largest creditor. At the end of 2021, it held roughly $3.2 trillion in foreign assets, 30? more than No. 2 Germany. As of October, it owned over a trillion dollars of U.S. government debt, more than China. Japanese banks are the world’s largest cross-border lenders, with nearly $4.8 trillion in claims in other countries. The policy change was relatively minor–a decision to raise the ceiling on yields for the 10-year bond. But global bond markets have been waiting for any signs that say the days of 0% (or lower) bond yields in Japan might be coming to an end.
January 2, 2023 | Daily JAM |
The stock market in 2022 was extraordinarily event-driven. The Federal Reserve’s decision to, finally, raise interest rates and to raise them fast with four 75 basis point jumps during the year. Russia’s invasion of Ukraine and the resulting shock to energy and food commodity markets. OPEC’s decision to reduce production. The big slowdown in China’s economy as the country first fought Covid with the lockdowns of major cities and industrial regions and then reversed course to no Covid policy at all. The unexpected (by many) ability of Democrats in Congress and the Biden administration to pass legislation with unprecedented levels of spending on clean energy technology and other efforts to slow the rise in global temperatures. 2023 will come with its own set of new (and revisited) market-moving events. Once again I think we’re looking at a year where market trends aren’t determined by revenue and earnings but by big events outside the market itself. Here’s my forecast of the 10 events (or trends or whatever) that will move stocks in 2023. I’ve tried to put them in some rough kind of chronological order so you’ll know when to what for events to unfold and ripple out into the financial markets.
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 14, 2022 | Daily JAM |
The Federal Reserve raised interest rates by 50 basis points today, December 14. That was a significant step down from the series of 75 basis point increases that the Fed has imposed this year. But in its Dot Plot projection and in Fed chair Jerome Powell’s comments after the rate announcement, the central bank signaled that it will raise interest rates to a higher peak and keep them at that level for longer than the financial markets had hoped. Stocks slipped on the combination of small rate increase and higher projected peak.
