There are many ways to decompose the bond market to identify the component pieces to infer what the market is pricing in.
We believe highly innovative companies, when accounted for properly, are cheaper than their non-innovative peers in all regions of the world.
The Federal Reserve has been raising rates at an extremely aggressive manner in 2022, taking the federal funds rate from 25bps to 4%.
In recent reports, we’ve been highlighting that innovation—as a factor represented by R&D as % of sales—has stopped underperforming and it is selling for an attractive valuation.
While many perceive the S&P 500 Index to be a broad innovation-heavy index, in a way it is and in a way it isn’t.
A couple weeks ago, in our quarterly strategy report (see: QSR-Has Innovation Bottomed?), I argued that it appeared that innovation had bottomed.
Last night, the Reserve Bank of Australia stopped short of another 50bps hike to its overnight cash rate.
It appears to us that global innovation has bottomed and offers attractive value.
Innovation was the market darling thematic for many years leading up to COVID.
Using our proprietary point-and-figure-based charting system, I review a couple thousand charts per week in an attempt to identify interesting buy or sale candidates.
Last week, the combined dollar value of hedge positions on the S&P 500, NASDAQ 100 and Dow Jones Industrial indexes was $121.43 billion, not far from the August 16 peak of $160.02 billion.
The most significant element going into the June low was positioning.
This the name of a recent research piece from the San Francisco Federal Reserve written by Adam Shapiro.
Given all the confusion in the world around COVID, supply chains, inflation dynamics and war, there are lots of potential externalities that could resolve themselves unexpectedly.
Over the weekend, we got a slew of data showing a generally weak economy.
Across US indexes, growth has experienced a resurgence relative to value off the June 17, 2022 low.
Since the COVID low in US Treasury rates and subsequent rise, the Japanese Yen has tracked the yield differential between the US and Japan.
After the June 17, 2022 low, stocks have jumped higher, taking out the 50-day moving average yesterday in the S&P 500. Many are debating whether this is a bear market rally or the reversal of the bruising 6-month decline.
The Smart Money Index was constructed by Don Hays and measures the market action in the first half hour of trading and the last hour of trading.
We think we could see a bullish back half of the year for equity markets. Our analysis follows in our Quarterly Strategy Report.
The President today asked Congress for a gasoline tax holiday to alleviate the cost of gasoline and diesel in the country.
Crude oil and energy equities have been on a tear for the last two years.
We have a very precise methodology for dissecting the world’s equity markets.
As everyone knows, the labor market has been quite strong, with expectations for the unemployment rate to fall further next week.
All year inflation has been the narrative driving markets.
The template of 1929 and 1987 is coming into focus in recent trading days.
Just today, as US inflation came in a touch hotter than expected, the Chinese Yuan is pulling lower, testing the lows of May 9, 2022.
Today the Federal Open Market Committee raised the fed funds rate (upper bound) to 1% from 50bps.
The clear and present danger to the global economy is inflation because global central banks are starting to take aggressive actions to deal with what they now believe to be non-transitory inflation.
The Fed is tightening into a growth slowdown
For a confluence of reasons ranging from COVID to property sector problems, China has been experiencing slower growth. Many cross-asset relationships suggest that a devaluation in China could help spur growth.
In a year when the US is experiencing massive fiscal austerity, monetary tightening, war, inflation and a pandemic, there are many drags to stock performance.
The Federal Reserve has all but cemented expectations for a 25bps rate hike next week. But, events have changed a lot in the last couple weeks that raise a faint hint that the Fed may not hike, despite elevated, persistent inflation.
2022 has been a tough year so far for risk management.
After President Biden’s speech, the consensus seemed to coalesce around the idea that the sanctions put forth were not as strong as they possibly could have been.
Of course, the backdrop right now is Russia—a large petroleum-producing country—threatening to invade Ukraine.
Tomorrow we get the consumer price index year-over-year for January, with expectations for 7.25%.
Since May 2020, the Chinese Yuan has defied the path of other emerging market currencies, strengthening by almost 12%.
This quarter’s strategy report, Forward Thinking 2022.
This Friday we’ll see where the US CPI comes out. We recently got the November print for the Eurozone CPI, and it came in hot, hitting 4.9% year over year.
For years preceding the COVID-19 pandemic, call option volume averaged about 15% of daily NYSE volume. This was a normal level of speculation that investors were used to.
A prominent feature of the post-Great Financial Crisis period has been the persistent decline in velocity, which is why the Fed has had to pump so much money into the system for so long. Absent an increase in the money supply, the drop in the velocity, all else equal, would have likely been the backdrop for a long recession.
We find compelling evidence that seasonal factors exist, historically leading November and December to be the highest 2-month combined returns all year. In our allocation portfolios, we have increased our equity exposure significantly in an effort to capitalize on these year-end trends.
Fed funds futures for 2022 and 2023 have broken out to new highs, likely on the back of rising inflation expectations. As things stand now, the market is looking for three hikes by the end of 2023, with the effective fed funds moving from 8bps today to 85bps.
Mid-Quarter Update: what does transitory mean?
Just when everyone thought we had COVID-19 whipped, the delta variant came along and US cases inflected higher.
This is our Q1 2021 slide presentation of our quarterly strategy report.
In this Q4 2020 slide presentation of our quarterly strategy report, we discuss: Bob Farrell’s Rules for Trading (#5 and #7 especially resonate with us right now). What the retail trading frenzy, recent IPOs and speculation can tell us...
In this presentation, we outline our argument for gold entering a new structural bull market.
We believe the risks of an intermediate decline are higher than average and would advocate a more cautious stance toward equities right now.