Things you need to know ~
- So it’s over – well maybe not completely….the GOP takes the House but leaves the Senate hanging in the balance
- Markets in slight retreat after surging ahead of the election
- Investors to assess what it all means – in the end politics don’t price stocks
- Stick to the plan, this is not the time to veer off course
- Try the Traditional Roast Turkey
Stocks shot higher again yesterday as election day wore on – the market seemingly telling us that it expected a GOP sweep as stocks surged – (but that was not what happened – while the GOP did take the House – they didn’t take it as decisively as some predicted and the Senate remains in limbo)…..the Dow gaining another 334 pts, the S&P up 21 pts, the Nasdaq up 52 pts, the Russell ended flat and the Transports added 105 pts.
For the most part there didn’t seem to be a ton of problems, but that is not to say there weren’t any…..redistricting led many voters to the wrong polling places, and it also caused some ballots to not include the candidates for that district, causing frustration and no votes while other places experienced ‘broken machines’ and not enough paper to provide the paper ballot…….And when you hear these stories you are in disbelief, but not surprised…..
In any event – the night was not as clean cut as the polls had led us to believe they would be…..for the most part – the votes fell along party lines and the races that had expected to be tight – were in fact very tight. Georgia is going to a runoff on December 6th as neither Warnock or Walker won 50% of the vote, The Pennsylvania Senate seat went to Fetterman (which is still unbelievable to me – but it is what is) and the Pennsylvania Governorship went to Shapiro – also a Democrat – suggesting that Obama had more of a connection to voters than Trump, Nevada and Arizona senate races still unclear while the Arizona governor race remains too close to call. Georgia re-elected Governor Kemp sending Stacy Abrahms packing…..while New Yorkers went for Kathy Hochul leaving Lee Zeldin stunned, Illinois re-elected Pritzker and Florida re-elected Senator Rubio over Democrat Val Demming by a wide margin while they crushed the hopes of Charlie Crist for Governor by re-electing Ron DeSantis – as they chanted “Two MORE years”…..which tells you that Floridan’s expect Ronny to run for President in 2024! (because his new term is 4 yrs. – capisce?)….Expect to hear more about the close races throughout the week as the votes continue to get counted and some candidates raise doubts…..In any event – it appears as if the GOP has taken control of the House leaving the Senate still hanging in the balance….In the end – it was truly a ‘mixed’ verdict….with the GOP NOT taking as big a win as the polls had suggested. Ok – it’s time to move on now…
There wasn’t any economic data yesterday and nor is there any today….much of the action will be all about the analysis over what went right and what went wrong and while that won’t price stocks in the long term it will direct the action today….You see – stocks have advanced 11% off the October low only to retrace and give back 5% thru last week, only to add back 3% thru yesterday…as predictions of a GOP sweep, then no, then yes again kept investors on edge….Now that the election is over and the results are mostly in – investors can refocus on what it all means. And what it means for now is – stick to your plan…..overweight the STPN (Stuff that People Need) vs. the STPW (Stuff that People Want) – at least until we see how the economic data responds to what has been an aggressive FED.
And that economic data includes tomorrow’s CPI report – which is expected to remain HOT….m/m numbers expected to be up on the TOP line while CPI EX food and energy is expected to be down, but we will get the final result tomorrow morning at 8:30 am. In addition we will also get readings on Real Avg Hourly Earning and Real Avg Weekly Earnings – what will they show? Will they keep up with inflation or leave Americans behind the 8 ball again….Well, we can be sure that earnings are not keeping up inflation so expect to hear more about how inflation is hurting Americans. PPI (Producer Prices) to be reported on Tuesday and they are also expected to be UP m/m but slightly lower y/y….
Look inflation is at the top of mind for investors and will remain at top of mind until we REALLY see it start to fall. Some expect that to happen in the 1st qtr. of 2023 while others don’t see it just yet. In any event -the FED is expected to keep raising rates until they don’t – and that will be when we get a terminal (neutral) FED funds rate at about 5.25% – 5.5%.
Now look – yesterday I noted that the best possible outcome for the US would be a split congress, why? Because it would force both sides to come together – to the middle to solve problems…it would eliminate the fringes in BOTH parties and allow for more thoughtful debate and policy discussion.
US futures are floundering this morning….the Dow – 75 pts, the S&P down 2, the Nasdaq up 7 and the Russell is down 2. DIS reported last night and missed on a bunch of lines and this morning the stock is quoted down $7 or 7.6% at $92.30. META on the other hand is up again after Marky takes ‘complete responsibility’ for the disaster that it is….announcing that they are about to clean house – laying off more than 11,000 workers (13% of the workforce). And on the back of that news – the stock trading up $3 at $99.50.
US treasuries now have to price in the mixed election – and while yields are retreating a bit they are not falling out of bed…the 2 yr. yielding 4.66%, the 5 yr. yielding 4.31% and the 10 yr. yielding 4.14%
The dollar index – DXY has been under pressure this week and is now down 3% from the early November highs as consolidation takes place after the vote. Intermediate support is $108.997 while the dollar index is trading at $109.80.
Gold has shot higher on the dollar weakness….up 6% since last week and now trading back above $1700.
Oil sold off and is lower again this morning on the back of more worries over China demand and a global recession. The EIA cut its outlook for demand in 2023 saying that they expect US production to fall more than expected next year and that is sure to keep a floor under prices. Diamondback Energy saying that the US shale industry will continue to struggle as costs rise. Currently oil is hugging the trendline at $88.15 and any further pressure could see it test support at $85. It remains in the $85/$95 trading range.
European markets are lower – down about 0.2%. There is nothing today that will be responsible for driving the market – investors there trying to decipher what happened with he US elections.
The S&P closed at 3828 – up 21 pts. Now that we have a better idea about what happened politically – investors will focus on what matters going forward. With a split congress – we can expect much less of the out of control spending, we can expect much less of the fringe narrative. And that is good for the country and for stocks and other assets. In the end – do not go and change you portfolio because of what happened yesterday. Let it settle in and let’s see how it begins to play out.
Remember – rates are going up and the FED has made it clear that they are not pivoting anytime soon. (Pivot here means a reversal in policy).
Stick to the plan – I suspect we will see that year-end rally that should take us to the 3900/4000 range…. Look beyond the next 6 weeks and instead focus on the next 6 – 12 months…. Look at the mega cap, multinationals that generate good cash flow, pay nice dividends and can weather the storm. Remember – buy the STPN (Stuff that People Need). Energy, Healthcare, Consumer Staples, Utilities and some big megatech –
Take good care,
Chief Market Strategist
kpolcari@slatestone.com
Traditional Roast Turkey
With the holiday upon us – here is another way to prepare the turkey….
For this you need: The Turkey, carrots, celery, onions, butter, s&p, an apple and orange, minced garlic, sage, rosemary and thyme, chicken broth, and a splash of champagne.
Begin by rinsing and draining the “defrosted turkey” – never cook a frozen turkey. Be sure to take your turkey out of the freezer on Tuesday morning and let it sit in the fridge to defrost. By Wednesday night you should be good to go…. Make sure to remove the bag with the giblets and neck from the cavity. Rinse it out and let it dry – or pat it down with paper towels. Now on Wednesday night you want to prepare it to allow it to marinate.
Mix all your seasonings together set aside.
Place the turkey in a roasting pan.
Next – take some softened butter and massage the turkey – breast, legs and thighs. Now – rub the seasonings into the turkey making sure to season all parts. Cover with foil and place back in the fridge.
Thursday morning:
Cut up the apple and the orange into slices and place in the cavity. Rough chop the veggies and place all around the turkey and in the cavity. Add the chicken broth and a splash of your favorite champagne – don’t ask why – its champagne – Just enjoy.
Preheat oven to 400 degrees.
Tent the turkey with foil and place in the middle rack and let roast for 30 mins or so…. now reduce heat to 325 degrees and let it cook – 12 – 15 mins per pound. So, figure it out….15 lbs. = 180 mins/ 225 mins. (3/ 3 ¾ hrs.).
Now – remove the foil and allow it to crisp up and turn golden brown. Once done – remove from oven and let it rest for 15 mins. Keep it covered to maintain the warmth.
Serve with all the usual fixings. Stuffing, Mashed Potatoes, Peas/mushrooms, Asparagus, Brussel Sprouts, Cranberry Sauce, Sweet Potato Pie and stuffed Italian Cubanelle Peppers.
Buon Apetito
