The Financial Markets – What’s Occurring
Friday saw the release of the retail sales for Dec in the US – poor figures, it is a sign of a
cooling economy just when FEDs are putting up rates and reducing Financial Markets Support.
*US Commerce Dept Dec -Retail Sales -1.9%; Consensus -0.1%
*US Dec Retail Sales Ex-Autos -2.3%
*US Dec Retail Sales, Ex-Autos & Ex-Gas -2.5%
My stagflation call playing out!!!
Recessions are the real and main Stock Market Ko;;er
FOR THE WEEK, THE S&P 500 FELL 0.3%, THE DOW FELL 0.9% AND THE NASDAQ FELL 0.3%
Themes
Inflation
*U.S. DEC. PRODUCER PRICES RISE 0.2% M/M; EST. 0.4% *U.S. DEC. PRODUCER PRICES RISE 9.7% Y/Y; EST. 9.8%
U.S. Producer prices rose a record 9.7% in 2021. Ex food & energy the rise was 8.3%, also a record. The Dec. headline number was held to .2% by a big drop in gas prices. That decline has already been reversed, so Jan. #PPI will be much higher. #Inflation will run hotter in 2022!
*US Dec Consumer Prices +0.5%; Consensus +0.4% *US Dec CPI Ex-Food & Energy +0.6%; Consensus +0.5% *US Dec Consumer Prices Increase 7% From Year Earlier; Core CPI Up 5.5% Over Year *US Dec CPI Energy Prices -0.4%; Food Prices +0.5%
For the last 12 years the Fed treated 0.2% shortfalls in inflation like they were a national tragedy, but now they ignore overshooting by 5% for a year. How can anyone think they have any credibility?
Fed watch
For the last 12 years the Fed treated 0.2% shortfalls in inflation like they were a national tragedy, but now they ignore overshooting by 5% for a year. How can anyone think they have any credibility?
FED’S BULLARD: THE MONETARY AND FISCAL ASSISTANCE PROVIDED IN RESPONSE TO THE PANDEMIC MAY HAVE BEEN EXCESSIVE.
“Federal Reserve Bank of Cleveland President Loretta Mester said the central bank should shrink its balance sheet as fast as it can without disrupting financial markets” that is not their mandate!!!
“Lael Brainard blames #inflation on #Covid. But it’s not Covid itself that created the inflation problem, but the fiscal and monetary policies supported by both Congress, Presidents #Trump & @POTUS and the #Fed to “stimulate” an economy weakened by Covid that created inflation”
Brainard: We still have 3.5-5m fewer jobs than pre-pandemic
FED’S HARKER: AFTER FINISHING ASSET PURCHASE TAPER IN MARCH, “CAN PROBABLY EXPECT” 25 BASIS POINT RATE HIKE
FED’S HARKER: WE NEED TO FINISH TAPER, THEN RAISE RATES, THEN START TO REDUCE SIZE OF BALANCE SHEET FED’S HARKER: REDUCING BALANCE SHEET COULD START LATE 2022 OR EARLY 2023
Imho the FED will give up tightening when Stonks fall significantly, here is a list of their previous Pivots
The historical Fed pivot seems to be between -15% and -22% on $SPX. In 2018 it was after $SPX -20%. In 2010 -15% In 2011 -22% In 2012 -15% when stocks dropped anticipating the end of QE2 which forced the Fed straight into QE3. Using current highs the pivot may then be 3750-4100.
Bonds
Shorter bond yields are rising. The ten-year hit 1.78% on Friday and will get to 2 % soon imo.
All assets/risk are valued in relation to Bond yields imho
Economic news due no market moving news due this week. China’s GDP out Monday …..
Earnings season begins again –JPM and Citi share prices dropped 5% Friday after they missed revenue estimates but recovered at the close.
Stock market
“This is a small nuance, but I wish to clarify that the stock market actually LIKES inflation. It raises a company’s nominal earnings. What the stk market does NOT like is the Fed’s efforts to fight inflation. There aren’t any such efforts at the moment, hence we hang around ATH.”
My thinking is that the economy will turn grim and Fed will not do what it now says it will.
After the 2008 financial crisis, $QQQ saw its lowest price in Nov ’08 while $SPY saw it in Mar ’09
Technical Analysis
My chart guy said
No coincidence where #ES_F bounced Friday: At its long-term trendline for 4th touch. Each bounce getting smaller Next Week: Last bounce chance, unless 4700 clears though (ATHs), another leg to 4560 then a 4430 low coming. Warning: Loss of 4625 it goes direct
Bitcoin
I am not so sure about these lines, I see support at 40k. In TA lines drawn from lows and highs can be quite subjective
Support held last week but may not again!!!!
Naz. Was this week’s foray under the line similar to the May drop below blue?
Conclusion
Cash markets closed tomorrow for Martin Luther King day and unless China GDP causes a stir futures should be quiet and close at 6 pm.
Big moves in spoos are happening between 4700 and 4600, mad Friday evening rally off lows was a repeat of many previous fridays.
Wait for the levels and run with the move.
Netflix out Wednesday, likely to sell off as subs are expected to be down. More Banks on Tuesday.
Retail and Banks bad, only home for money is big Tech, which is so overvalued as result.
I am still BEARISH
Call or email for discussion.
Colin 01-6644034 0851722729