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The Quotedian - Vol VI, Issue 76 | Powered by NPB Neue Privat Bank AG
“In the short run, the market is a voting machine but in the long run, it is a weighing machine.”
― Benjamin Graham
Let’s start with an important vote regarding the future of The Quotedian. Most of you have helped to shape the past, but now it is time to decide on one of two formats.
Let me explain … new responsibilities are somewhat impacting the time I can dedicate to the best ‘hobby’ I ever had. This leaves us, dear Quotedian community with two choices:
We go back to the truly daily format, with Dashboard, Calendar, QOTD, COTD et al., but with comments much, much, much shorter deliberations, i.e. comments. For those of you with us for years, think pre-2019. Also, let charts.
We keep all-of-the-above and have longer multi-asset class deliberations, but limit the publications per week to 1-2 Quotedians.
I realize I have asked a similar question in recent past, but again, circumstances require us to take this decision now.
So, please, please cast your vote (and if your IT system does not allow you to vote, send me an email to firstname.lastname@example.org with your choice).
As I feel generous today, I give you a full week to cast your vote ;-) and in the meantime, I do whatever pleases me!
Need to take important (investment) decisions? We can help!
Contact us at email@example.com
Ok, to today’s comments & chart reviews.
It feels a bit odd having worked for hours on end on NPB’s Q4 CIO outlook, speaking of which you can find your copy of the
and the accompanying
and then to release it just as such earth-shattering things happen as they have over the weekend in Israel. And whilst our heart goes out to all victims and their families, from an investment point of, the longer-term implications are yet to be felt and are probably more a thing of months, years and yes, even decades.
From a short-term point of view, Monday was more important for the investment world - and I stress “investment world”, with all its banality, absurdity and unimportance in the bigger scheme of things.
Then it was on Monday, when the Fed “announced” via several speeches by different officers, that the bond market (aka vigilantes) had done the tightening for them and for now, they are done with increasing interest rates further.
Equity markets did what equity markets do in this situation, which is ignore any negative conclusion (e.g. pending recession) from these comments and concentrate on the positive side (e.g. lower rates ahead) only. BTW, they (they as in equity investors) did the same on Friday, when an out-of-this-world NFP number (336k vs 250k highest estimate) was interpreted as strong economy equals strong earnings - forget the “higher for longer” part of that equation.
Here’s a close-up of the S&P 500 daily chart:
What does this mean for the longer-term picture as we zoom out on the same daily chart?
Clearly, the market wants to head higher, and our shoulder-head-shoulder pattern has now been nullified with the move back up above the neckline. Well, it was fun whilst it lasted, but as we have learned and relearned again and again…
Let’s look at some more chart, the Nasdaq for example:
Uh, oh, actually never broke that dreaded neckline and now about the break the resistance line from the downtrend in force! What a change from just two weeks ago, when we wrote about Staring into the Abyss and Into the Void!
Small cap stocks continue to be weaker than their large-cap cousins, though the Russell 2000 is in all fairness once again rebounding where it is supposed to rebound:
In Europe, the rebound is a bit slower to get going underway, as usual, but Tuesday’s candle was impressive nevertheless:
And most European equity markets also eked out a small gain yesterday, not a small feat given the bad earnings news coming from luxury bellwether LVMH:
And talking about impressive, here is Japan’s Topix 5%-plus rally in a picture:
So, where is all this strength coming from? After all, the overall news surrounding geopolitics, US debt, looming recession (check out our chartbook once again) cannot possibly be good news for risky assets such as stocks!
Well, here are some charts on investors’ positioning:
Institutional risk appetite is low:
Market sentiment (as per MS) is low, triggering a contrarian buy signal:
Systematic traders may have sold too fast:
Now go back and read today’s “Quote of the Day” above.
One of our major calls in our Q4 CIO Outlook, was for interest rates maybe having reached their cyclical (not cyclical, not secular!) top. Man, we only had to wait one session for this seemingly having come to fruition. Here’s the US 10-year Treasury yield chart:
Of course, it is still to early to take a victory lap, but a start is a start. Here’s what this looks like in terms of bond prices rebound:
As usual, there’s much more, but I need to cut short.
Don’t forget that today is CPI-day in the US - so maybe all of the above is useless by this afternoon…
And please, please, pretty please, do not forget to leave your vote further up.
Wonder weight-loss drug Ozempic has been in the news lately, especially as it is creating havoc on some other sectors. For example, the consumer staples sector, which is made up of by many of our favourite daily sugar rush provides (Coca Cola, Danone, Nestle, Kellogs, Mondolez, etc.) is down over 15% in relative terms. The following chart shows the iShares Global Consumer Staples ETF (KXI) versus the Vanguard Total World Stock ETF (VT):
This is starting to looked bombed out, and some of the above-mentioned, low leverage, stable return stocks could become of much interest.
As a hedge, you can buy Ozempic maker Novo Nordisk, or, according to one particularly “smart” analyst, airline stocks:
Me? Tongue in cheek ….
Everything in this document is for educational purposes only (FEPO)
Nothing in this document should be considered investment advice
The views expressed in this document may differ from the views published by Neue Private Bank AG
Past performance is hopefully no indication of future performance