Things you need to know –

• Global markets under pressure – Gas shortages across the UK causing angst – brent pierces $80/barrel
• WTI following suit – now trading about $76/barrel up 23% since mid-August
• Jay Powell to explain to Congress why inflation is no longer ‘transitory’
• 2 Fed Presidents resign after revelations of massive gains in stock trading – Rosengren trying to deflect pointing to his kidney disease, Kaplan remaining hushed
• 10 Yr. Treasury now yielding 1.535% on its way to 1.8%?
• Try the Pumpkin/Butternut Risotto (for Thanksgiving).

Global markets are under pressure this morning – European markets all down about 1+%, gas shortages across the region causing panic buying, price of brent crude oil piercing $80/barrel, (while WTI prices this morning are now above $76/barrel) some gas stations closed as they don’t have anything left to sell…..not because there is an oil shortage, but because there are not enough truck drivers to deliver the gasoline to the gas stations. (Think supply chain – truck drivers – issues).

US futures are pointing to a much weaker opening as well,  as investors continue to fight – bulls clearly tiring while bears appear to be on a rampage….The Senate GOP blocking a House passed bill that would prevent a gov’t shutdown on Friday and suspend the debt limit until December 2022 – that’s correct – their bill would suspend the debt limit for 14 more months……So now – the Dems are forced to suspend the debt limit on their own by combining it with their $3.5 Trillion budget reconciliation bill and jamming it down our throats.  Now – this is all very dramatic and political, and it only adds to the already anxious, negative tone – so it will cause some pressure on stocks in the days ahead – but remember – in the long term it will not price stocks…and while this is all very dramatic – everyone knows that this too shall pass.

And then at 10 am

FED chair Jay Jay Powell is due to appear before Congress today to detail the Fed’s economic response to the Covid 19 pandemic….and while he is there expected to hear more on why ‘transitory inflation’ apparently isn’t so ‘transitory’.  He is expected to tell congress that

‘The causes of the recent rise in inflation MAY last longer than anticipated…. that while economic growth has continued to strengthen, it has been met with upward price pressures caused by supply chain bottlenecks and OTHER FACTORS’.

And just what are those ‘OTHER FACTORS’…. Well, I’m sure you can guess – think massive amounts of stimulus and endless supplies of money for one……. It is as they say ‘time for the country to pay the piper’ – to bear the consequences of all of this ‘fun’ that we have enjoyed.   Hmmm…. maybe he just woke up from that dream he has been in….

And to that I would ask:  Are you kidding me?  Wait…. how long has he been saying that inflation is transitory and how long has there been a chorus of analysts/strategists (myself included) that have challenged that view?  And by the way – you should have known this was coming – Why?  Because I pointed it out in my note last week after his FOMC press conference – the word TRANSITORY was conveniently eliminated from his narrative – he never said the word TRANSITORY in his comments……yet no one in the media chose to focus on it…. conveniently they focused on how strong the recovery is allowing us to begin to taper (at some point).  Trying to accentuate the positive of a strong economy….

And then –

In addition many are also wondering if we will hear anything at all about yesterday’s TWO (not one, but TWO) Fed resignations…..Boston’s Rosengren for ‘health’ reasons (completely stepping away from his equity trading during his tenure), while Dallas’s Bobby Kaplan is stepping aside because of the WSJ front page story that detailed how Bobby was ‘trading’ his account and racking up million dollar gains….– buying and selling big name tech – Apple, Amazon and other FANG names, S&P futures, etc.…all while he was an active FED member – with all kinds of information and data that the rest of us did not have access to.  Interestingly though, both said that they would SELL the stocks in their individual trading accounts to ‘stop any inquiry’……. Funny how that happens just ahead of a FED taper?  I mean you can’t make this stuff up!  Who would ever believe it?

Not sure about you, but they used to call that ‘Inside Information’. In addition – both of those FED members are more ‘hawkish’ – which now means what for the FED?  Will they be replaced by equally hawkish members or more dovish members?  All this as we are about to taper.  Don’t think it’s happening this year….

And so, it goes….and this morning as detailed – US futures are under pressure…. Dow futures down 115 pts, S&P’s down 30 pts, the Nasdaq down 200 pts and the Russell down 6 pts….

10 Yr. treasury yields which spiked higher yesterday on both economic optimism AND inflation fears – kissed and pierced 1.51% before settling back at 1.488% are now trading at 1.525% this morning on its way toward 1.6% before ending the year yielding 1.8+%.  The 30 year is now yielding 2.05% and 30 yr. mortgage rates are now back above 3.1%…. (Oh my!) And this will surely a cap on equites if not force a price revaluation.   The VIX (fear index) is up 9.5% as of 6 am this morning suggesting that it will be a volatile day…. all this as September ends…… And are you surprised?

Yesterday stocks put in a mixed performance…. the Dow added 71 pts, the S&P lost 12, the Transports up 130 while the Nasdaq lost 77 and the Russell gained 33 pts as the struggle continues….

Eco data yesterday showed an increase in Durable goods – more than expected, Capital goods ordered and shipped both higher than expected and that speaks to the strength of the economy…which is good, but with that comes this nagging issue called inflation….and that is causing concern.  Today’s eco data includes Wholesale Inventories – +0.8%, Retail Inventories of +0.5%, Housing Price Index of +1.5%, and the Richmond Fed Survey of 10.

Bitcoin and Ethereum are both lower…. down about 2% this morning as the fight over crypto continues.

The S&P ended the day at 4443 – and with futures lower this morning – we can expect to see it breach support again….and most likely look to test the lows of last week before the end of the month.  The lows of last week were 4300 – below the intermediate trendline….and that would not be out of the question at all.  I guess the only question now is – will that level hold or will we barrel through and test lower?

Remember – I think the path of least resistance is lower.

Remember you can text the word INVEST to 21000 on your cell phone to get my digital business card. Feel free to download it and send me off an email or text. Happy to engage and talk markets, planning, thoughts, concerns, and ideas.

You can follow me on Twitter @kennypolcari and on IG @kennyp1961.

You can also find my daily videos on my YouTube channel – Kennypolcarimedia – My URL address here:  https://www.youtube.com/user/kennypolcarimedia

Take Good Care

Chief Market Strategist, Consultant
kpolcari@slatestone.com

Pumpkin, Butternut Risotto – Served in Baked Baby Pumpkins

It is that time of year…. you see the pumpkins all around….it is fall, the air is brisk, and you need to consider this dish for your Thanksgiving table. Easy to make because you BAKE this one and it is delicious to eat……

You will need:  Chicken Broth, Arborio rice, Butternut squash, 1 1/2 cups of pumpkin puree (not the pie filling that you buy in the store – you need real pumpkin puree), large, diced onion, chopped fresh basil, plenty of fresh grated Parmegaina Cheese, olive oil – and the kicker – 3 tbsp. of Mascarpone Cheese. –

(Mascarpone is a soft white cream cheese from the Lombardy region of Southern Italy.  It is the result of the culture being added to the cream skimmed off the milk used in the production of Parmegiana.  It has the consistency of soft cream cheese and is used in a variety of Italian dishes including deserts)

Preheat the oven to 400 degrees.

In a baking dish – combine the rice, cut up butternut squash, the pumpkin puree, diced onion, and the chicken broth.  Season it with a bit of s&p and mix well.  Cover it tightly with a lid or with tin foil and place in the middle rack in the oven.  Re-visit it in 10 mins intervals and stir.   It will be done when most of the broth has been absorbed and the rice is no longer hard.  This should not cook any longer than 40 mins max.

Remove from the oven and add – the Parmegiana, the Mascarpone and the chopped basil – mix well (but do not smash the butternut squash) and serve immediately in the baked baby pumpkins – see below.

Here is what you do.  Cut the top off the baby pumpkin.  Scrape out the insides (seeds).  Place a dab of butter inside – place in a roasting pan – with its top – with a bit of water in the pan and bake for no more than 20 mins.  You can do this alongside the risotto – You want them to be cooked but not so soft that they break apart when you add the risotto.  If you are making a lot of them – then you will need to do this separately….do the pumpkins first and serve with the warm risotto.

Now add 2 tbsps.’ of the risotto to the baked pumpkin – Serve with the top just askew.   Makes a great table presentation at your Thanksgiving table.

Buon Appetito.