What will the Dots Say? Experts Opine – Try the Leg of Lamb

Kenny Polcari Uncategorized

Things you need to know.

  • Stocks rally, yields back off and the FED gets ready to expose the ‘Dots’
  • Talking heads all jawboning investors to expect 2% yields and not to worry
  • All eyes on the FOMC tomorrow – Inflation?  Don’t be silly
  • New lockdowns across Europe and Astrazeneca gets cancelled
  • Oil takes a breather – but that short term
  • Try the Leg of Lamb

Ok…..stocks rallied hard again – posting closing records – leaving any 10 yr. yield concerns behind….Basic Materials (XHB) up 2%, Consumer Discretionary (XLY) up 1.34%,  while JETS – the airline index sprinted higher – rising 3.72% as the excitement builds over a new world and less restrictions here at home…which is causing concern among some in the medical community  in America as Europe remains infected and is experiencing new rounds of infections….….Italy the latest to impose another lockdown, joins France, Portugal, Poland, Austria, Belgium etc. as a new variant of Corona spreads across the countryside….and that is causing Dr. Fauci to jump up and down telling us to stay at home, do not go out, but that is falling on deaf ears – as more and more states allow for less and less restrictions….and that is part of if not the rally story….as the rollout of the vaccine proceeds faster than expected….and the stimulus checks began arriving at mistaken bank accounts – but whatever – at least it showed up somewhere.

And all of this will surely help the consumer and consumer spending….which is a powerful driver of economic growth and will in the end be a big benefit to the corporate bottom line, even as the talk of coming tax hikes – capital gains, wealth and income taxes – did little to stop the buying….….by 4 pm – the Dow added 175 pts or 0.5%, the S&P’s up 25 pts or 0.65%, the Nasdaq tacked on 140 pts or 1.05%, the Russell up 7 pts or 0.38% and the Dow Transports rose by 86 pts or 0.61% – leaving The Dow Industrials, the Dow Transports, the S&P and the Russell at new closing highs….only the Nasdaq – is struggling a bit after the beating it took two weeks ago….but that too is most likely about to change.

The talking heads have hit the road and they are all ‘jawboning’ for calm in the markets as they prepare for the next move in the 10 yr. T-Bill………..Treasury Secretary Janet Yellen and Goldman‘s Davey Kostin taking to the stage and the airwaves trying to talk everyone off the ledge…..Everyone that is concerned that a further rise in rates will be the death knell for equities…..and while that will be true – at some point (I say 2% will cause stocks to hit a wall while 3% will cause a bigger re-pricing…)  – it is in fact NOT true right now with rates at 1.6% ….and so the efforts by all these key people does make sense…. because they do offer some credibility and god knows – we need someone with credibility to help calm the investor psyche and market nervousness.

Now that doesn’t mean that Fed Chair Powell has done a bad job…in fact, I would argue that Jay Powell has done a great job of in delivering the narrative – telling us what the FED will do and how long they will hang around….and that should not be a question at all…..the poor guy keeps telling us – every chance he gets that he and the FED are NOT going anywhere and that official rates will remain at 0 at least thru 2022 and inflation to be a non-event (forever) and that he has plenty of tools in his toolbox to deal with anything that comes down the pike…In fact – will Jay Powell set off a round of March Madness?

And that is exactly the issue…..many are not sure that they truly believe him because they can feel the pressure that he and the others say does NOT exist…..so that speaks volumes….so they do have their work cut out for them…and we will hear all of that again tomorrow at 2 pm when the FOMC comes out from behind the iron curtain and announces their latest decision….

Now to be clear – NO ONE is expecting that rates will change at all…..but everyone is waiting patiently to see if any of the speech writers have changed the language, change the sentence structure, changed the words.  What will he say about the Dot Plot graph?  What will they say about GDP? What will they say about the surge in Bitcoin? Will they say anything about the surge in stock prices? Housing?  Inflation?
What will he say about the Dot Plot graph? GDP expectations and Inflation expectations are both higher – so if the fed members move their dots around the graph to reflect this increased concern – then watch for the market to react.

Inflation?  Did someone say inflation?  Now we have been beating this horse for too long…. with one side saying – ‘Nothing to see here, move on..’ while the other side says – ‘Hold on – what world are you living in?’….and yesterday’s Empire State Manufacturing survey came in well above expectations – which on the one hand is good, but it also reflected a surge in prices at the manufacturing level and like the elevated PPI – (Producer Price Index) that is surely going to cause prices at the consumer level to rise at some point……..and THAT is the issue…..Because – while the FED has said that they are wiling to let inflation run ‘hot’ – investors need to know what that definition really is….so will Jay define it once again or not?  Will not be hot enough to burn us or will it just keep us snuggly?  I suspect he will say that inflation is expected to run at 2% – maybe a bit higher in the next quarter, but then it should back off in the 3rd and 4th quarters…

Next up was the tax story….and with Joey and Kamala now on tour – singing the praises of the $1.9 trillion stimulus package – they are onto the next big stimulus program – and word has it that this one has a $3 trillion price tag – and guess what – taxes are going up and the push for a guaranteed basic income is also now gaining speed in places like California and New York – (Wow, now that is a surprise!).

Remember – the Dem’s can do whatever they want without any support from 50% of congress (or the country) – because they can use the reconciliation process to jam all these hikes through….so while it is not done yet, we all know it is coming…. but the market is choosing to wait and be patient to see how this really unfolds.  Will they jam it all through or will they reconsider the impact that this will have on the midterm elections?  So here we go again…talking about elections….and do not forget – each one of these taxes has a bevy of lobbyists that are sure to ‘work’ their magic as the conversation gets started…. I am exhausted already….

And so, this morning – the markets are setting up for a digestion day…. futures not up or down significantly after yesterday’s rally.  At 5:30 Dow futures are down 40 pts, S&Ps are down 2, the Nasdaq is up 46 pts (in a game of catch up) and the Russell is off 6 pts.
Value continues to outperform Growth and with Value up 11% ytd vs. growth names up only 1.4%, and the 10 yr. is at 1.60% as the day begins…. With the FOMC release tomorrow – expect to see so many opine on what they think the FED will say and what that means for the markets and I believe that will only fuel the value story even more….
Eco data today includes Advance Retail Sales of -0.5%, Industrial Production of +0.3% and Capacity Utilization of 75.5% – which is benign…. when this number pierces 80 it then raises the concern level over building inflationary pressures.

European markets are all up small across the board –Investor is there focusing on tomorrows’ FED call. AstraZeneca continues to be the story in Europe as its use gets suspended in a variety of countries now including Italy after some reaction concerns.  The WHO (World Health Org) telling everyone to relax – saying that there is no evidence to suggest that their vaccine is unsafe……but remember – the WHO does not have the best reputation for taking control.  The BoE (Bank of England) will make their policy announcement on Thursday followed by an announcement from the BoJ (Bank of Japan) on Friday.   At 6 am – the FTSE +0.62%, CAC 40 +0.04%, DAX +0.56%, EUROSTOXX +0.31%, SPAIN +0.33% and ITALY +0.51%.

Oil – fell yesterday amid some stockpiling concerns and concerns over the most recent lockdowns in Europe – both of which I think is ridiculous – because demand is not going away anytime soon and once, they get this under control in Europe – expect demand to surge.  And I do expect them to get this under control.  Oil remains in the $60/$65 range….

DXY tested lower support on Friday and this morning it is up small – trading at 91.78 remaining well within the 91.18/92.81 band.

Bitcoin – is trading at $55,800 and Ethereum is at $1776.

The S&P closed at 3968 – making a new closing high after testing even higher at 3970……. Now while we inch closer to the channel trendline at 4040 – there is still plenty of reasons to think we will test lower in the days ahead….in fact maybe even tomorrow when Jay Powell takes center stage.  Any sense that the tone has changed at all will leave stocks vulnerable to another pullback – the extent of which should not be a crash, but more of another round of re-pricing that will take some of the fluff out.   We remain in the broader 3770/4040 channel – any move lower should find support at the century mark – 3900.

Stick to the plan, do not chase, trim where necessary and put money to work when its right….and that may not be today……and that is ok.

Text INVEST to 21000 to get my digital business card – give me a call if you want to discuss what I can do for you.  You can now get a video version of this note on my IG (Instagram) feed – my handle is Kennyp1961 (https://www.instagram.com/kennyp1961/)
Take Good Care,

Chief Market Strategist, Consultant
kpolcari@slatestone.com

Leg of Lamb

Easter is coming and for many of us – Lamb is the traditional dish – try this leg of lamb….
First you need to make the dressing for the lamb and for this you need.

Olive oil, Fresh lemon juice, 6 cloves garlic, Fresh rosemary, kosher salt, and black pepper.   Now make the marinade…. Add the ingredients to a blender or food processor and process until smooth. The marinade should be thick in consistency, so it does not run off the meat while cooking and forms a bit of a crust.

Massage the leg of lamb with the ‘marinade’.  Set aside.

Preheat the oven to 425 degrees.

Next peel and dress the potatoes with olive oil, s&p, fresh lemon juice, garlic powder and oregano.  Toss and mix well.  Put the potatoes on the bottom of the roasting pan.  Now place the lamb on top and put in the oven covered and roast for 25 mins.  Now turn the oven down to 350 degrees and continue to cook – uncovered…. (rule of thumb – 20 mins per pound is about right).

Make sure to baste the potatoes and the roast while cooking.  When done – remove, cover, and let rest for 15 mins.  You can now broil the potatoes so that they become almost golden brown.

Slice the lamb – arranging nicely on the platter, circle the meat with the roasted potatoes.  Make sure to serve with a lg mixed salad and a variety of your favorite veggies…Sweet potatoes works great with this dish.

Buon Appetito.