Things you need to know
- Investors continue to put money to work post the FED meeting
- Bank Of England – raises rates for the 3rd time in a row – inflation at a 30 yr. high
- Oil – moves back to $104.50/barrel
- Vlad is losing his S**t – Joey is calling Xi Xi
- Try the Chilean Sea Bass Bathed in a Sherry Cream Sauce
Good Friday morning….and what a week it was…. we finally got the FED ‘stuff’ behind us…. we now know what’s ahead. Hike after hike after hike….and investors (more likely algo’s) can’t get enough of stocks as the clarity of the FED’s intention is now known….…. the rally in stocks taking us up 5% for the week – coming into today. At the closing bell yesterday, the Dow added another 420 pts or 1.2%, the S&P up 54 pts or 1.2%, The Nasdaq up 180 pts or 1.3%, the Russell up 35 pts or 1.7% and the Transports up 210 pts or 1.3%.
Away from the US macro data, investors are beginning to consider what impact the war in Ukraine will ultimately have on stocks and remember what we have been talking about – Geo-political events can cause and do cause short term chaos, but in the end do not price stocks.
Oil – which has been all over the place lately surging 45% (on top of the 25% since January 1st) to a high of $130/barrel in the days after Putin invaded Ukraine has since retreated…and was down as much as 28% to find a low near $95/barrel….it has subsequently moved up again to find stability just above $103/barrel. Yesterday 2 of the big banks – MGS and RBC upgraded their price targets for oil – and expect to see it settle in at or near $120/barrel this year. RBC puts Brent oil at $150/barrel and if that is true – then WTI (West Texas Intermediate) should really be closer to $140/barrel. And this will continue to fuel the inflation monster….no matter what the talking heads say…. And the latest shutdowns in China manufacturing cities and ports (due to another wave of covid…. yawn!) will only add more pressure to the supply chain and cost structure. So, again – to hear some FED officials tell us that they expect inflation to ‘ebb’ by the summer is insulting. But let’s move on….
Of the 11 broad S&P sectors – it was a Green Day…. Energy – XLE leading the pack up 3.5%, Basic Materials – XLB up 1.9%, Healthcare – XLV up 1.6%, Consumer Discretionary – XLY up 1.8%, Real Estate – XLRE up 1.4%, Industrials – XLI up 1.3%, Financials – XLF up 1.2%, Communications – XLC up 1.1%, with Consumer Staples, Tech and Utilities carrying up the rear.
The 10 yr. Treasury ended the day yielding 2.15%, the 30 yr. ended yielding 2.44%. Fixed rate 30 yr. conforming mortgages are now 4.5% and if you need a jumbo (> $647k) you can expect to pay closer to 5% Gold rose by $33 or 1.7% to end the day at $1,947/oz. Oil fell $1.4 to end the day at $95.04/barrel. The Bloomberg commodity index – BCOM rose by 3% adding more volatility to the inflation story. Talk of a coming recession is now at the top of the agenda…. while many economists expect to see one by 2023 – the FED and the administration is working hard to parade around a number of analysts that are debunking that story……Recession? Don’t be ridiculous…. but I wonder what they will say when the FED has to get more aggressive in the months ahead as inflation pushes higher.
Look – Jay Powell told us on Wednesday that the odds of a recession are NOT elevated and that the US economy CAN ‘flourish’ even as they withdraw stimulus…..and with Fed funds at 2% he might be correct – but if inflation keeps ticking towards 10% (and don’t think it can’t) the FED will need to get more aggressive IF they truly want to slow it down and when they do – a recession will be difficult to avoid. Let’s just not sugar coat this, let’s not say everything is ‘ok’ when there are real challenges ahead. And again – that does not mean light the place on fire, it just means adjust your portfolio if you need to. Look – anytime we get a headline (economic or geo-political) that jolts the markets in an anxious environment – expect stocks to retreat – until investors can discount what that reality is…. something we have just witnessed…. which is why I say – don’t make emotional decisions.
I continue to favor the value sector and the big, boring yet beautiful Americana multinationals that are good divvy payers as a larger weighting in my portfolio. If you don’t want to pick individual names and you want broader dividend exposure that will blunt some of the downside – consider some of the First Trust Products…. FVD (FT Value Line Dividend) ETF, RDVY (FT Rising Nasdaq Dividend Achievers) ETF and SDVY (FT Nasdaq SMID Rising Dividend Achievers) ETF.
This morning US futures are under a bit of pressure – which should be no surprise at all after this week’s surge……. Dow futures down 200 pts, S&P’s down 30, the Nasdaq off by 90 and the Russell down 14 pts.
Speculation over Vlad’s mental health is now top of the agenda…. have you heard some of his latest rants? ‘Peace talks’ not showing any signs of progress and his latest comments on Biden and the allies as well as Russian’s that don’t support his fight are more disturbing with each passing moment. Joey is due to speak to Xi Xi today at 9:30 am – encouraging him to step back from supporting Vlad as this conflict continues and that he will warn of ‘costs’ if China doesn’t back away…. …. Let’s see how that goes – as rumors suggest that China is supporting Russia with weapons and armed drones.
China is expected to tell Joey that they will NEVER accept US coercion, they will punish any company that puts pressure on China during this crisis and that China remains ‘fair and objective’ when it comes to Ukraine. Xi Xi will be clear – that if Joey pokes China, he runs the risk of wreaking havoc on the US economy because China will respond very quickly, and we have left ourselves vulnerable to China – so we have no one to blame but ourselves. I guess the question is – How will Joey respond? And we aren’t even talking about Taiwan yet…. just wait until that starts to happen….
Eco data today includes Existing Home Sales, and they are expected to be down by 6.2%.
European markets are lower across the board…. Yesterday the Bank of England raised rates for the 3rd time in as many meetings – noting that UK inflation is running at 30 yr. highs, the war has sent energy prices surging and they upped their inflation forecast to 7.25% – expected to peak next month…. Mmmmmm? At 6:45 am…. markets across the region are all down about 0.5% – 1%. Again, not really an issue after its rise this week.
Bitcoin is trading at $40,600 while Ethereum is at $2,800.
The S&P closed at 4,411- closing right on the high for the day – leaving us only 40 pts (or 1%) away from trendline resistance at 4450 – which is the long term trendline…. but remember – the S&P did suffer a death cross so the down trending short term trendline is at 4,437… So, we could see some pressure right there between 4437 and 4450 as investors sort this out. In any event – stick to the plan.
Take Good Care
Chief Market Strategist
kpolcari@slatestone.com
Chilean Sea Bass in Sherry Cream
Preheat oven to 425 degrees.
Rinse the fish and pat dry. Marinate in a bit of olive oil, fresh lemon juice and s&p. (if you have a favorite additional seasoning – feel free) Coat the baking pan with olive oil and place fish in oven – bake for about 15 or 20 mins.
While this is baking – prepare the sherry sauce. You will need: Butter, garlic, minced shallot, clam juice, heavy cream, sherry, s&p.
Melt the butter (3 tblsp) on low heat…smash and then mince 1 clove of garlic – add to butter. Sauté…now add the minced shallot and about 1 tblsp of clam juice. Stir. Next add sherry – like 2 tblspn and 1 cup of heavy cream. Simmer for 5 mins – sauce should reduce by 1/4. Taste. Season with s&p… taste again. Good?
Now remove fish from oven and present on a warmed plate on a bed of wild grain rice. Spoon the sherry cream sauce on top and serve immediately. You can complement this dish with steamed string beans and a large mixed salad. Total time to table – 35 mins. Enjoy with your favorite chilled white wine – nothing fruity.
Buon Appetito.
