Weekly Update

On a Possible Chinese Stock Rally and AI

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Published May 10, 2024

 

Just before the Great Financial Crisis (GFC), Emerging Markets went on one last tear ripping higher by +12% in October 2007. That move capped a near 5x rally of the group over a 5-year period as China embarked on a massive build out. The Emerging Markets ETF (symbol: EEM) closed that October 2007 at a price of $39.32 per share. That same ETF opened 2024 at $39.83 – virtually no gain whatsoever in sixteen YEARS!

In 2020 as markets raced higher despite Covid restrictions and dislocations, Emerging Markets looked like they had finally found a new rally. But, as has been the case repeatedly over the past decade and a half, it was all quickly undone.

Emerging Markets have historically been highly correlated with commodities and with the fortunes of Chinese stocks. China is now trading near its post-GFC lows with pessimism about the Chinese economy running rampant. (more…)

Weekly Update

AI-Driven Spending Ramps Up

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Published May 3, 2024

 

Below we have a grab bag of information from recent economic and earnings reports. Taken together, the information paints a picture of a normalizing economy as the pandemic dislocations continue to ebb. Many inputs are now back to pre-pandemic levels. (more…)

Weekly Update

Bearish Sentiment Sets the Stage for a New Rally

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Published April 26, 2024

 

Below is an analysis of very recent market activity by Blake Millard. First, Blake talks about the technical condition of the stock market. The stock market became oversold last Friday which often leads to a bounce, which we have seen this week. As the market weakens, investor sentiment follows (note: sentiment does not lead). The deterioration in investor sentiment sets up a new rally as the “wall of worry” has been put in place and sellers have already sold – e.g. there is fresh money for new buys. All the market needs then is a catalyst to kickstart the shift. This week’s tech earnings could have provided that catalyst. But interest rates keep rising. So a couple of tame inflation reports would do the trick. (more…)

Weekly Update

Corporate Earnings Reports Begin with a Thud

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Published April 19, 2024

 

Markets have fixated on interest rates and the Federal Reserve’s monetary policy for the past few years. Rate hikes led to the stock market’s swoon in 2022. The end of those hikes brought a new rally in 2023 that carried into the first quarter of this year. Below is a great overview from the Wall Street Journal on how economists’ views of interest rates and the economy have evolved and where they currently stand. Investors remain obsessed by the timing of the initial Fed rate cut. (more…)

Weekly Update

U.S. Hits Peak “Full” Employment

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Published April 12, 2024

 

With investors in between earnings this week and last the focus has been on the outlook for future interest rate cuts. Inflation data continues to come in a tick hotter than expected while economic growth remains solid. Below we check in with private capital commentary on recent employment trends and the outlook for upcoming earnings. (more…)

Weekly Update

Stingy Inflation and a Robust Economy Push Out Rate Cuts

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Published April 5, 2024

 

Below, we get Schwab’s take on recent inflation readings the potential for Fed interest rate cuts. The market continues to be obsessed with the timing of these future cuts. That obsession shows particular day-to-day market impact when we are in-between corporate earnings reports, as was the case this week. (more…)

Weekly Update

Corporate Earnings Expectations

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Published March 29,2024

 

Below we offer a couple of perspectives on the current stock market and outlook for interest rates. Rate expectations have been a key driver for stocks over the past couple of years. First up, comments from Barron’s on the other driver of markets – the outlook for corporate earnings. That is followed by economist Claudia Sahm’s thoughts on how the Fed should approach the current economic environment, as investors look for upcoming cuts in short-term interest rates. (more…)

Weekly Update

The Fed Paints a Neutral Picture

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Published March 22, 2024

 

Coming into 2024, many investors expected the first Federal Reserve cut in interest rates to occur in their March meeting. That cut could be followed by as many as five more cuts in 2024. Though we are not market forecasters, that reading seemed excessive to us. After all, the economy was humming along pretty well coming into 2024. What sort of economic weakness would occur to cause the Fed to shift to a very aggressive rate cut regime? It didn’t make sense. (more…)

Weekly Update

A New Industrial Revolution?

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Published March 15, 2024

 

Below we provide a recent report from Delta Research putting some of the current market events in a broader context.  Enjoy!

“U.S. share of global equity value has risen to 50%.  The U.S., with a population of about 332 million people, has created half of all equity wealth in a world of 7.9 billion people.  If this does not indicate capitalism works better than socialism and communism, it is hard to image what would. (more…)

Weekly Update

Bulls Keep On Running

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Published March 8, 2024

 

Below we present an overview of the market from a sector perspective written by Delta Research followed by a few snippets from Blaine Rollins’ newsletter detailing where inflation remains sticky among a couple of positive signs for investors. Enjoy the ride while it lasts! (more…)