Things you need to know
- Jackson Hole – that’s all you need to know
- Try the Roman Style Country Chicken
Stocks closed higher as the Jackson Hole boondoggle kicked off…welcoming the global ‘elites’ from every corner of the world (as they all flew in on private jets) as they descend on Wyoming to discuss the state of monetary policy, the state of inflation, the state of stimulus, and the ‘root cause’ of what the hell is going on…..Investors seemingly ‘ok’ with what we are about to hear……..Sit tight – it’s coming….
As the closing bell rang the Dow advanced 325 pts or 1%, the S&P gained 59 pts or 1.4%, the Nasdaq added 210 pts or 1.7%, the Russell gained 30 pts or 1.5% while the Transports added 255 pts or 1.7%.
And today is Friday August 26th……T-5 hours…. until the ‘highly anticipated’ speech by non-other than JJ Powell…. oh boy, oh boy…. What will he say? That is the question of the hour……Will we hear him sing an oldie by goodie – that takes us back to the inflationary days of the late 70’s? For those of you who don’t remember (because you weren’t here yet!) click on the link below and for those of us that DO remember – enjoy it as your re-live high school in 1977…. Andrea True Connection – More, More, More
https://www.youtube.com/watch?v=lQV-w0pnZ3U
“More, more, more, how do you like it, how do you like it, More, more, more, how do you like it, how do you like it…. But if you want to know how I really feel, Get the camera’s rolling, get the action going….”
And don’t worry – the cameras are rolling and the action is about to get going……and don’t overthink this….JJ is NOT expected to ‘tell you’ what the next move IS, so, like I told you on Wednesday – if you are expecting him to lay it out in a clear, concise fashion – you are about to be disappointed…If you are expecting him to ‘pivot’ or go soft – you too will be disappointed……if you expect him to tell you whether it’s 50 or 75 bps – you too will be disappointed……What we should expect him to do – is strap ‘em on and take control. He needs to be aggressive (but not too much); he needs to lay out the options to make it clear that investors (and the markets) understand that his focus is INFLATION not RECESSION. Just to be clear – the recession WILL be the net result.
He needs to remind us that while the FED is data dependent – the data DOES tell us that inflation is alive and well, it is NOT rolling over and dying as some might suggest and as a result – he and his teammates MUST remain vigilant in a ‘Jay Powell Explains’ Tik Tok expose……
I expect that he will re-iterate what we have been hearing from his team for the last 2 weeks….everyone of them singing the same song – More, More, More……and so I am in the camp that unless the PCE deflator (today) and the CPI and PPI due out in 2 weeks (ahead of the FOMC meeting) completely collapse, and I mean completely collapse – then I don’t see how he can do anything other than move the needle by 75 bps. Inflation is running at 8.5% and that was after oil declined by 25%…..but oil is now advancing once again – it is UP 11% in the last week and while it will not show up in the September report – it will show up in the October report, so going ‘soft’ in September would be a mistake…..but hey, the FED has been making mistakes for a while now….in fact – they made a mistake back in the spring of 2021 – when inflation blasted thru 2% – going from 1.6% to 3.1% in one month…..telling us it was nothing to worry about – that it was ‘transitory’………How’d that work out? Calls for year-end fed funds rates of 4% – 4.25% demand an aggressive move in September otherwise we won’t make it…. Capisce?
He needs to confirm that he is prepared to use all of the firepower at his disposal to ‘snuff out the transitory inflation condition.’ He then must reiterate that any idea that we will see a rate CUT in the spring of 2023 is nothing but a pipe dream….he must lay out the idea that he has a path forward and a pace for future rate increases…he must acknowledge that inflation is ‘too damn high’ and that he has a plan to fix it. If he can do that without wavering, without caving to the temper tantrum that may likely result – then I think he has done the right thing….
In any event – no matter what he says – stocks are still the place to be in the long run…..What you need to do now is focus…..focus on what you own, why you own it and how that portfolio would be expected to perform in this inflationary, rising rate environment. The other part of this is knowing who you are. Where you are on the ‘risk scale and where you are in the ‘life cycle.’ The life cycle part of this is a key component – capisce? A 30 yr. old has a very different view than a 60 yr. old….so no need to ‘overthink’ it……. make a plan and then execute.
Eco data today includes the FED’s favored inflation gauge – the PCE Deflator – and that is expected to come in at +6.4% y/y and while the m/m part is expected to be 0% (like the CPI was) – Do not get dragged into the ‘inflation is dying fight’ – it is NOT (yet)…..Other eco data points include personal income of +0.5%, real personal spending of +0.4%, and wholesale inventories of +1.4%. AT 10 am – we will get the U of Michigan sentiment indicator of 55.4 along with 1 yr. inflation projection of 5% (still too damn high) and 5 – 10 yr. estimates of 3%. (Again, you know how I feel about the 5 – 10 yr. estimates – I think they are useless – but that’s me… – You do you….)
Yesterday saw Basic Materials advancing by 2.3%, Communications – XLC up 1.9%, Financials, Tech, and Industrials all advancing by 1.6%, Consumer Discretionary and Healthcare up by 1.1% while Energy, Consumer Staples, and Utilities rising by 0.7%. The value trade – SPYV gained 1.1% leaving it down 5% ytd, while the growth trade – SPYG gained 1.6%…. leaving it down 17% ytd. The Semiconductors – SOXX advanced by 3.7% (NVDA surging by 4% even after they warned ahead of their 3rd qtr. earnings report due out on November 17th…. they are taking a ‘long view’ of this…. the stock initially sold off – found support at the trendline $170 – and then did a 180 and surged into the bell – closing at $179/sh. It appears to be stuck between $170 & $195….
Treasury yields rose again but don’t worry, it is still inverted –
Oil is up another 1.4% today at $93.72/barrel….it is now up 11% since a week ago…. yesterday it kissed resistance at $95 and backed off to close at $92.50….as it builds a base to continues its advance. Gold holding its own at $1760/oz.
US futures are at 6 am are down…. – Dow futures -100 pts, S&P’s -18, the Nasdaq – 75 and the Russell is down by 10. You should not be surprised based on what happened yesterday. A buy the rumor, sell the news event might be what happens….
European stocks are all lower…. not a disaster – but lower…. German sentiment for September is due out along with Consumer Confidence for France and Italy. In the UK – and across Europe – electricity prices are skyrocketing…. only adding to the deepening cost of living crisis……along with surging inflation. At 7 am – we see European markets all down about 0.4%.
This morning we learn that there are more than 20 million Americans that are behind on their electric bills – which are up 15.2% y/y – causing some to estimate that we will see a ‘tsunami of shutoffs’ coming in the months ahead…. maybe Joey can ‘cancel’ their electric bills?
The S&P ended the day at 4199…. Up 59 pts…. We remain in the 4080/4310 trading range and will most likely do so until after Labor Day. Then we hit the September/October time frame – which is usually a seasonally difficult time for the markets and this year – Remember – September has been the worst month for stocks…. we usually see a decline of about 2% in the averages….
We have a market under pressure, we have a FED that is becoming more hawkish, we have a divisive tone across the country ahead of what is proving to be a contentious mid-term election that is both a referendum on the current administration and also a referendum on the prior administration. We have gov’ spending completely out of control, taxes rising across the board all while the economy is beginning to roll over. So, brace yourself and strap in – there is more chop ahead and while I do think that the lows of the year are in (3625 ish), I would not be surprised to see us test S&P 3800 ish before the elections in November. If the eco data continues to deteriorate, then I think we test the lows of June…. So – don’t rush to put all of your money to work….be strategic and be smart.
Take Good Care
Chief Market Strategist
kpolcari@slatestone.com
Roman Style Chicken (Pollo del Paese Lato di Roma)
Paese lato di Roma – means the Countryside of Rome and it is here that we get today’s recipe…. This meal is hearty, voluptuous, aromatic, a taste tantalizing sensation…….the Italian countryside is renowned for its unique artistic heritage, its beautiful mountains, villages, people, and landscapes…. This meal comes from the heartland….
You will need: Chicken breasts and thighs on the bone, S&P, Olive oil, red, green, and yellow bell peppers, prosciutto, garlic, can have diced tomatoes*, white wine, thyme & oregano (fresh is always better), chicken stock, capers, and parsley (for color).
Begin by seasoning the chicken with S&P. In a heavy skillet – heat olive oil – enough to cover the bottom of the pan, When the oil is hot – then brown the chicken on all sides – remove and set aside.
In the same skillet – turn heat to med – add sliced peppers, and chopped prosciutto – sauté until the peppers are soft and the prosciutto is crisp….(no longer than 5 / 8 mins), next add chopped garlic (not minced) cook for another min or two….add diced tomatoes, about 1/2 – 3/4 cup of white wine and oregano/thyme.
Scrape the bottom of the pan. bring to a boil – add back the chicken and chicken stock (about 1/2 – 3/4 cup) bring to boil again…. now reduce heat to simmer and cover. Cook for about 30 mins longer. Once ready – add about 2 tblsp of capers and chopped parsley for color – mix and serve on a warmed platter – family style – and present in the center of the table.
Accompany with a large green salad of arugula, spinach, and bib lettuce, sliced tomatoes, red onions, and cucumbers – dressed in a balsamic vinaigrette. Your choice of a light red wine – nothing to heavy or a chilled white would work fine with this dish.
Buon Appetito.
