Things you need to know.
– Investors go on a shopping spree.
– But are the lows in? Not so fast….
– Tonight, brings us the Presidential debate.
– Wednesday & Thursday brings us the latest inflation data.
– Try the Cavatappi with Arugula and Cannelloni Beans.
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Investors go on a shopping spree! Buyers ‘scooped up’ all the bargains created by the drawdown last week sending stocks sharply higher…. I guess the ‘Bloomies’ analogy hit home…. LOL.
Here is my appearance on Coast to Coast (Fox Business) with David Asman yesterday – where we discussed this rally.
https://drive.google.com/file/d/1IBSl7uLKn0wY3YDGdaxYcu6kfV7V4F-J/view
By the time the bell rang at 4 pm – the Dow added 485 pts or 1.2%, the S&P’s up 64 pts or 1.16%, the Nasdaq gained 194 pts or 1.16%, the Russell up 7 pts or 0.3%, the Transports +210 or 1.35% while the Equal Weighted S&P added 70 pts or 1%.
Everyone of the 11 major S&P groups closed higher…. Tech (XLK) leading the way +1.6%, followed by Industrials (XLI) + 1.55%, Financials (XLF) +1.5%, Consumer Discretionary (XLY) +1.45%, Real Estate (XLRE)+1.2%, Utilities (XLU) +1%, Basic Materials (XLB) + 1%, Energy (XLE) +0.75%, Healthcare (XLV)+0.7%, Consumer Staples (XLP) +0.7% and Communications (XLC) + 0.4%.
In the end – I would say it was mostly technical buying…. a kind of dead cat bounce buying…. resulting from the most recent declines last week. As I said in my interview – I am not completely convinced that it is over, that we won’t test lower over the next 7 weeks – in fact, I hope we do – I am preparing for us to retest the August 5th low on the S&P at 5116, this way we get it out of the way, we shake the branches enough to see who falls out…and then we get to refocus.
Remember – there is a lot going on…. We got the September FED meeting next week, we’ve got a move by the FED to change policy, we’ve got more inflation this week and more eco data in the weeks, ahead, and we are now in the final lap in the Presidential election, which is proving to be chaotic. Tonight, will most likely be the one and only debate between Kamala and Donny – hosted by ABC at the Philadelphia National Constitution Center at 9 pm.
Expect all kinds of analysis on Wednesday about who dominated, who articulated their plan the best, who is going to raise taxes, who is going to close the border and who is going to address that violence that has now invaded many of the big (and small) cities, what about Medicare, SS and most of all – who struck the knockout punch – because you know THAT is going to be the topic.
And then early voting starts as soon as next week….and before you know it – Tuesday, November 5th will be here and then it will be over…. In the end, it will be what it will be…. Let’ s hope for a split Congress – because gridlock is good for the markets.
There is no eco data today, but tomorrow brings us the August CPI data and it is expected to be flat to slightly better, Thursday’s PPI is expected to be the same and I say this because I do not expect it to be a game changer at all….The writing is on the wall….the pace of inflation is trending lower – and that’s good. Other economic data is weakening, but it is not imploding, the job market is not DOA by any stretch suggesting that we are most likely going to have a semi-soft landing, unless we get hit by something that is completely unexpected – (which could happen).
Bonds did very little – the TLT rose by 0.4% while the TLH gained 0.3%. The 2 yr. is now yielding 3.68% while the 10 yr. is yielding 3.71%… Now the 3rd day of being un-inverted – and still no recession…. oh boy, the anticipation is killing me.
Oil ticked up slightly – but remains sub $70/barrel. The news remains the same – weakening China demand, weakening US demand and an oversupply of oil, coming from OPEC+ and all of the non-OPEC+ nations… Last week – we learned that the Saudi’s have postponed their plans for additional supply to come to the markets until December and even that is not carved in stone. Now, it appears that $67.50 ish is the new low…. we tested it last week and have now appeared to bounce off of it…. but where are we really going? $70, $72 ish – yeah, that’s probably about it, IF nothing changes…..and if the economy in fact has a hard landing then it’s anyone’s guess – but $65 ish would be a level tested in September 2022, March 2023 and June 2023….But in the end – it will be about how hard the landing is.
Gold is holding steady at $2530….as it waits for tomorrow’s CPI and Thursday’s PPI report. It remains in the $2500/$2550 trading range.
The VIX – Fear Index – declined by 13% yesterday – makes sense as buyers found a reason to buy stocks and put their fears aside. But do not become complacent….it continues to tell us to stay awake and while it appears to be settling in it can turn on a dime…. Which is what I expect it will do again over the next 7 weeks and when it turns up, stocks go down.
This morning futures are a bit weaker….Dow futures -55, S&P’s -10, the Nasdaq is down 75 while the Russell is down 5. Again, September and October are seasonally ‘weak’ times of the year, and as a result long term investors remain cautious about putting new money to work as they balance recession fears vs. a soft or hard landing. Add in the latest eco data, next week’s FOMC meeting and all the uncertainty around the election and you have an even more skittish market.
Goldman Sachs’s prime brokerage desk tells us that hedge funds have been in liquidation mode over the past month as they sell stocks to raise cash in anticipation of increased volatility and lower prices in the weeks ahead. Which says nothing about what you, a long-term investor needs to do. You need to stick to the plan, while eliminating all the noise. Remember -you can hedge yourself by playing the contra trades (vs. bailing on your long term holdings)…..the DOG, SH, PSQ, and the triple levered SPXS will all help to blunt any significant move to the downside while the VIXY will take advantage of any significant volatility to the upside….…..But remember – these are NOT long term plays – use them strategically, keep them short term in nature….Because if the mkt turns – these hedges turn quickly as well.
While a cut in rates will benefit the markets if it can be assured that a cut is about getting us to a neutral rate rather than because the economy is about to go off the edge – it doesn’t really matter to your daily life. A 4.75% fed funds rate will do nothing to ease the cost of living….It will do nothing for your food bill, your housing costs, your utility bills or your tax bracket….What would help all of that? A recession.
European markets are mixed as all of the ‘joy’ yesterday is being replaced by ‘uncertainty’ again today. The UK, Germany and Italy all a bit lower while France and Spain are just north of the unchanged line. Again, investors and traders across the continent await next week’s FED meeting.
The S&P closed at 5471 up 65 pts… And while it feels good when stocks rally – I am not sure we are out of the woods just yet…. remember – September/October are weak months historically and this year maybe a bit more so. While the US economy is slowing it is not crashing…. Long term investors need to remain focused and balanced. Building a strong, well diversified portfolio takes time and commitment…. Give me a call to discuss.
Take good care.
kpolcari@slatestone.com
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
Disclosure: The content provided in this material is designed for educational and informational purposes only, and it is important to note that it does not constitute personalized recommendations. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of Kenny Polcari or SlateStone Wealth.
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.
While considerable effort has been invested to ensure the accuracy and dependability of the information presented, we must clarify that we cannot guarantee the accuracy of third-party information. Our usual sources for third-party data include channels such as Bloomberg.
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.
Cavatappi w/Arugula and Cannelloni Beans
Cavatappi is a kind of macaroni that looks like a corkscrew. The word Cavatappi is a combination of Cava & Tappi – whose literal translation means “tap extractor” or corkscrew. Capisce?
This is a vegetarian dish that is easy and quick to make.
Bring a large pot of salted water to a boil.
Add the Cavatappi and cook until aldente – 8 / 10 mins.
In a sauté pan – heat up some olive oil, crushed garlic and a sliced/chopped “red” onion. Sauté until the onion is soft and translucent. Now add a can of cannelloni beans – juice and all and stir to heat up…about 4 mins or so.
Add the Cavatappi and cook until aldente – 8 / 10 mins.
Now add the arugula and stir. Arugula will wilt – no worries.
Drain the pasta – saving a mugful of the pasta water…
Add the pasta to the sauté pan and add back 1/4 cup of the water to re-moisten. Toss in a handful of Parmegiana cheese and toss. Serve immediately in warmed bowls with freshly toasted garlic bread.
Buon Appetito.
