Things you need to know.
– Stocks continued to trade lower.
– Futures this morning suggest a bounce.
– Biden is OUT, but who is in?
– Oil down on an expected ceasefire in the Israel/Gaza war
– Gold up on the prospect of lower rates
– Bonds remain confused.
– Try the Tagliatelle
Stocks continued to get hammered on Friday…. CrowdStrike (CRWD -11%) after a failed upgrade that affected a range of industries (banks, hospitals, airlines, & emergency services) around the world added to the angst…. The Nasdaq losing another 0.8% brought the total loss for the week to 3.6%. The cybersecurity sector down 1.5% Semi’s down 3%, and the Tech sector XLK gave up 1.6%.
The rotation that began a couple of weeks ago – that led investors, traders and algo’s to trim positions in the big ‘tech’ winners and move the money into the underperformers was supposed to be proof tat the rally was broadening out as the FED prepared to change policy and cut rates. But that mindset came under fire this past week – some investors ran for the door – hitting the sell button on nearly every sector……The money raised moved into cash, cash equivalents and Gold in what is known as the safety play… (Gold has rallied more than 5% in the last two weeks.)
But on the other side of this trade are investors that took advantage of the angst and continued to put money to work – at a discount – for example – AMZN – 9%, AAPL – 5%, MSFT -7% as well as a host of others…….…causing us to ask – Did their story change? No, but when asset managers need to raise quick cash – they sell the biggest names in the sectors that are ‘stretched’…. Names that they helped to ‘stretch’…so as an individual investor – don’t overreact. Remember – for every seller there is a buyer – so while some investors want out, clearly others want in….and that is what makes this so exciting.
The headlines make it all dramatic – Dow gets crushed! Nasdaq under fire! The volatility index surges – the VIX rose by 32% last week – The sellers can’t get out fast enough and stocks decline…. …. but remember that when the market is under pressure – it is the buyers who control the action…. Why? because the sellers are panicking…. they are looking for someone to ‘take them out of their position’ and so the buyers get to set the price (which is lower) forcing the sellers to ‘take it or leave it.’ The lower the bids go, the more angst it creates and the more the sellers want out and the more prices decline and the more uncomfortable it gets.
It goes from the Fear of Missing Out (on the way up) to the Fear of Losing Money (on the way down). It’s not more complicated than that…the only thing you need to ask yourself is this…. Has the story changed? Are investors selling stocks because the fundamentals are now different? OR did investors take stocks to levels that don’t support the data? Essentially – Did prices just get too damn high! Because there is a difference. And do not forget – you only lose money if you TAKE the loss – meaning you sell your stocks. If you own quality names and the story hasn’t changed – then why would you sell? Ask yourself – why not buy more…..
Bonds continue to toss and turn as investors continue to weigh the Fed’s next move – the TLT -0.5%, TLH -0.5% and AGG -0.2%. the 2 yr. is yielding 4.51%, the 10 yr. is at 4.22%. We continue to get mixed messages from the different FED heads as the market awaits the results from this month’s FOMC meeting that begins next week. We are entering the black out period – so do not expect to hear anything from the FOMC members after Wednesday. But there should be no surprises – rates to remain unchanged this time, but September will most likely see a change.
Oil – fell $2 on Friday as renewed hopes over a Gaza ceasefire took hold. Secretary of State Antony Blinken hinted on Friday that it is within ‘sight.’ A ceasefire in Israel will also cause the Hootie’s to stop the attacks on commercial vessels in the Red Sea. This morning is down 40 cts at $79.75. The trendline is at $79.60 and $79.40. A failure to hold there could see oil trade down to the $77 range.
Gold -which traded up and thru $2500 last week – gave back some of that move on both profit taking and the idea that we are in for a soft landing. With investors assuming that we are going to get 3 rate cuts in the fall – Gold will surely benefit. Remember – low rates will cause the dollar to fall and that will support higher gold and commodity prices.
Ok – so what else is new?
Well, by now you heard that JoJo is out – and it appears that the baton is going to be passed to someone…. Kammy is hoping that it’s her but there is a curious silence from some of the senior members of the party. Are the Dems conceding the WH? Are they going to put Kammy up only to have her lose rather than putting up someone that they feel is a real contender in 2028? Donny can no longer use the age issue as an issue, in fact – they can and most likely will use the age issue on him…. because no matter who they pick – we can be sure it won’t be an 80 yr. old. The next 4 months is going to be very interesting and will most likely add to the volatility that we see in the August – October time period. In any event – the Dems are hoping that by putting up Kammy -they will take back the black vote, the female vote and if they choose Pennsylvania’s Josh Shapiro – they can take back the Jewish vote as well.
US futures are up this morning. Dow futures +60, S&P’s +35, Nasdaq +180 and the Russell is +9. But remember – stocks have gotten beaten up – so a bounce is not unexpected. Some are suggesting that the Biden news means nothing for the markets – and in the long run that is true, but I would say that all of this political drama can and does cause short term chaos. In fact – you could say that all of the weakness we saw over the past two weeks was because of the uncertainty over what he was going to do. Was he in or was he out? Now that he is out – he’s out. No more uncertainty…. the markets can now focus on who the two candidates will be and then react to what it thinks the chances are for a Democratic win or a Republican win.
There is no eco data today….but later in the week – we will get the Philly Fed Services and Manufacturing reports, Existing Home sales, S&P Manufacturing and Services PMI’s- both expected to be in expansionary territory, New Home Sales and the much anticipated PCE index which is expected to come in at 0% m/m and 2.4% y/y – which is down from 2.6% last month – giving the rate cut narrative more fuel.
The S&P closed at 5505 on Friday…down 40 pts. Down 3% from all-time high. Short term trendline is at 5410 – down another 1.7% from here… a level I believe we have to test. The last time we tested trendline support was May 31st. Expect the chatter today to be all about who is in the lead, and who the Dems will pick as the VP candidate…Names being considered – Newsom, Whitmer, Pritzker, Shapiro and Beshar… Remember – Kammy is not a shoe in, so don’t go betting the ranch just yet.
From an investment perspective – continue to focus on opportunities created by the chaos…. Remember – having a plan is key for a long-term investor… Staying focused is KEY…. Give me a call to discuss.
Take good care.
kpolcari@slatestone.com
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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The market commentary is the opinion of the author and is based on decades of industry and market experience; however, no guarantee is made or implied with respect to these opinions, which may not necessarily align with our firm’s standpoint.
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Kenny Polcari is the Chief Market Strategist for SlateStone Wealth. Neither Kenny nor the partners of SlateStone Wealth are compensated in any manner by the issuers of any securities mentioned in the publication.
Tagliatelle, Prosciutto, and Cherry Tomatoes
This is easy to make and so good…
For this you need: Fresh Tagliatelle, diced prosciutto, diced cherry tomatoes, scallions, Shallots, butter, lite cream, s&p, fresh basil and fresh grated parmegiana cheese.
Bring a pot of salted water to a rolling boil.
Begin by melting ½ stick of butter in a sauté pan. Add in the sliced shallots and sliced scallions (whites only).
Now add in the diced prosciutto and sauté for 3 – 5 mins… (you do not want to cook them until crusty). Turn heat down to low and add in 1 c of lite cream. Stir to blend. Now add in a couple of basil leaves – torn into pieces. Mix.
Add the fresh pasta to the boiling water – this will cook in about 4 mins.
While the pasta is cooking – season the sauce with s&p. Add in the diced cherry tomatoes.
When the pasta is down – using tongs – put the pasta directly into the sauté pan with the sauce and mix to coat. If you need to add in a ladle of the pasta water – now is the time.
Now add in 2 handfuls of the fresh cheese and serve immediately. Always have extra cheese on the table for your guests.
Buon Appetito.
