Things you need to know.
– NFP is benign – or that’s what they want you to believe.
– This week’s CPI & PPI will be the final data point for the FED.
– FOMC is now in lockdown mode.
– Oil & Gold higher on a NEW Mid-East conflict!
– IONQ – a name in Quantum Computing/AI Demands.
– Try the Filet of Sole #4 in the Feast of the 7 Fishes.
And so there it is…the NFP came in a bit stronger at 227k new jobs rather than the 214k estimate, so while stronger, not a barn burner – Leisure and Hospitality added 53k jobs, Healthcare + 54k, Gov’t jobs up 33k while Manufacturing added 32k….Last month’s read of 12k new jobs was revised upwards (but apparently not enough), Unemployment rose to 4.2%, up from 4.1% but the real number out 4 decimal places was 4.246% – almost enough to round up to 4.3% all while wages are growing at 0.4% m/m (estimate was +0.3%) and 4% y/y (estimate was 3.9%) – but they are poo pooing the rise in wages as inflationary because we also saw the unemployment rate tick higher and that suggests (to some) that we don’t have a wage/price spiral condition, but we do have rising unemployment which ‘demands’ lower rates.
Look, 4.2% unemployment is not out of line, in fact the historical average unemployment rate in the US typically falls between 5% and 6%, based on data collected over several decades. However, the exact average depends on the timeframe you consider and any economic fluctuations, such as recessions or periods of rapid economic growth. Right now, we are not in recession, but we do have fairly ‘robust’ economic growth – again, just another reason to NOT cut rates…But, hey, what do I know?
And all this sent the FED Fund Futures traders into a frenzy – the odds (now) of a 25-bps rate cut are 80% up from 70% earlier in the week. Mohamed El-Erian (famed economist/and former Co-Chief Investment Officer at Pimco) finding cover for the FED from the rise of the unemployment rate saying that ‘the unemployment rate increase means the FED will be comfortable cutting rates by 25 bps”.
Ok – in the end, it will be what it will be – I am in the camp that they do nothing, but I am (apparently) a lone voice – what this tells me is that it is the market that is driving the bus rather than the FED – because the data does not support a cut at this time….…..In any event – a move from 4.50% – 4.75% to 4.25% – 4.5% – is not likely to make a difference in your cost of living, but it is what it is…..let’s see what this week’s CPI and PPI suggest – both are expected to be hotter than the expectation which runs counter to the idea of a rate cut.
I’m still considering what JJ said last week – when he told us that ‘we are in no hurry to cut rates’ because the labor market is not in distress and inflation remains stubborn. On Friday –Fed Governor Mishy Bowman reiterated that point by saying that she favors lowering interest rates ‘cautiously’ as underlying inflation remains ‘uncomfortably’ above the FED’s 2% goal. I don’t know, but I’d err on the side of caution, I’d rather wait and cut in the new year rather than cut now and have to RAISE rates in the new year…but that’s me.
In the end – If we get that cut, I think it is because the FED is getting pressure from the current(lame duck) administration that does NOT want to cause any big disruption for stocks this close to year end….Markets are up big so let’s just do what ‘they’ want now but then once the new year comes and Donny takes the reigns then you can be more cautious….which then suggests to me that they will keep the market right here thru December 31st and then let it correct once the new year begins and the slate gets wiped clean. Which is why, I’m telling you to be patient –
By the time the market closed on Friday – the Dow lost 123 pts, the S&P gained 15, (kissing 6100), the Nasdaq gained 160 pts, the Russell up 13 pts, the Transports lost 100 pts while the Equal Weight S&P once again gave up 7 pts.
Bonds ticked up while yields fell. The TLT was up 0.15% and the TLH gained 0.3%. The 2 yr is now yielding 4.10% while the 10 yr is yielding 4.16%.
Oil lost $1.10 last Friday to end the day at $67.20 (after testing a low of $66.98) bringing us ever closer to the lows of October and November as traders continue to worry about high supply – despite OPEC+’s announcement delaying their planned output increase into March of 2025. The sense is that OPEC is just waiting for better pricing before adding more supply, to which I would say – it might be a long wait – the Non-Opec producers continue to produce and supply the market with oil….which continues to put pressure on oil prices, so if the Saudi’s and OPEC+ add more oil to the mix- that will only serve to push prices even lower…which – btw – is good for global inflation and transportation costs.
This morning though, oil is a bit higher – up 90 cts at $68.10 – after the weekend drama in Syria – that saw the fall of Syrian leader Bashar Assad forcing him to seek asylum in Moscow after rebels, (think ISIS) ended his family’s 50 yr rule over the country. This new conflict in an already HOT middle east is causing oil to rally on the assumption that it could create issues in the near future.
Gold which ended Friday up $6.50 at $2654 is higher again this morning up $20 at $2674 –as investors digest what the fall of Syria means for an already destabilized middle east. JoJo announced that the US struck dozens of ISIS camps yesterday in an attempt to stop a resurgence of Islamic extremism, while Donny told us on Truth Social that this is NOT our fight.
In the end, though, the collapse of Syria will see money move into Gold as the ultimate safety play. In addition – China reported that they purchased 160,000 troy ounces (5 tons – which is a relatively small amount) last month and some analysts are trying to tie the move in gold to XiXi’s purchases….I’m not buying that, I think the move is both a safety play and a play on US interest rates…Remember on Friday morning I wrote that
“If today’s NFP report is benign – then expect a rate cut to be signed, sealed and delivered…. A stronger report should see gold come under pressure while a weaker report should see it rise. In the end – everyone will have their own interpretation – depending on what they hear”. And apparently, they heard lower rates are coming…Remember – lower rates will mean a weaker dollar (the dollar is down 2% since the November high) and that is supportive of higher gold prices. Let’s wait for the CPI and PPI to see how they interpret what is expected to be higher prices.
US futures are flat …. Dow futures are down 2, S&P’s – 5, Nasdaq -33, while the Russell is +4. Global investors are struggling for direction after the political upheaval in Syria and the monetary policy shift announced by Beijing. XiXi announced that he will embrace ‘a moderately loose monetary policy strategy’ in 2025 and that is welcomed news for investors that are starving for more stimulus – but analysts suggest that unless the loose monetary policy is coupled with more fiscal spending, it won’t mean much. Hong Kong markets which had been lower surged higher after the announcement ending the day up 2.8%. Chinese share though closed slightly lower – down 0.2%. In addition – investors are also awaiting US inflation data out on Wednesday and Thursday. Those are the two most important eco data points this week ahead of next week’s FOMC announcement.
Remember – the FED is now in lockdown mode – we are a week out and so, members of the FOMC committee won’t be talking in public. Any news now will come from Nicky T of the WSJ or our friends at Goldman Sachs.
European markets are flattish…. German, Spain and Italy are just a bit lower while Euro Stoxx, UK and France are a bit higher. Investors there are weighing what the newest turmoil in the middle east might mean for ongoing geo-political conflict and what the latest China news means for trade.
The S&P ended the day up 15 pts at 6090. Again, just short of entering yet another new century in 2024. At this point, I would let the portfolio ride only making last-minute changes due to tax planning issues. I am not making any changes to my long-term portfolio during the last 3 weeks of the year… I am sitting back – enjoying my gains for the year. I am NOT chasing, nor am I selling. Like I said, new money is sitting in my gov’t mm fund earning 4.25% while I wait…. In the end – patience is a virtue. Your trading account is a different story – that is much more ‘interactive’.
Now in that vein, I occasionally give you a name that I am looking at (Not Slatestone) that appears interesting and opportunistic. Today – let’s look at IONQ – NYSE last sale: $37.97. Up 206% ytd.
The growth of AI across industries is driving demand for more energy-efficient computational solutions. Quantum computing, particularly IonQ, is positioned to revolutionize this space by offering more efficient and complex data processing capabilities.
They have secured a $55 million contract with the U.S. Air Force Research Lab.
Achieved breakthroughs in ion-photon entanglement and barium qubits, improving quantum system scalability and accuracy.
They have introduced a partial error correction technique, reducing energy and hardware demands.
IonQ estimates its total addressable market (TAM) at $850 billion. The company is transitioning from government contracts to enterprise adoption, potentially accelerating growth.
In the end, I think IonQ’s innovations in quantum computing position are a speculative but promising player in the convergence of AI and quantum computing, with the potential to redefine computational efficiency in an AI-driven era. As always you need to do your own homework before buying or adding to your portfolio.
If you have long term money to put to work, I will say – do nothing until the new year, when I expect the market to re-price.
Click on this link https://slatestone.com/contact-us/
Put ‘KP’ in the message box and I will be happy to reach out to discuss creating a long-term wealth-building portfolio that will serve you and your family well in the years ahead. Remember – it’s a marathon, not a sprint.
Take good care.
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.
#4 – Filet of Sole
This is simple to make and is a personal favorite and is one of the 7 fish dishes for Christmas Eve…. No substituting this one!
For this you need: Filet of Sole, Eggs, Italian Style Breadcrumbs * (recipe below), flour, Olive Oil, and tartar sauce.
Beat 6 eggs in a large bowl to make an egg wash.
Place Flour on a separate plate, place Italian breadcrumbs on a separate plate. – Now make a production line. Flour – eggs – breadcrumbs.
Next – dredge in flour – shake off excess then introduce into the egg wash – remove from the egg wash and place it on the plate with the breadcrumbs. Using a fork make sure that you cover the filet in breadcrumbs. Place on a clean plate. Repeat until you have breaded all of the fish.
Next turn the oven to broil and pour olive oil in a pan – maybe like 1/8 inch in pan. Heat the oil under the broiler…. Now be careful and watch – as the oil gets hot you need to make sure that you are ready to broil the filet. (Do not walk away – the oil will burst into flames if you don’t do this correctly)
Take a pinch of breadcrumbs and toss in the pan…do they sizzle right away? If so – then you are ready. Now place the filets in the hot oil and flip to the other side…now let them broil to a nice golden brown…. When ready – using a spatula – carefully flip the filets over to brown the other side…. Once browned – remove and place in a serving platter to join the other fish dishes on your Christmas Eve buffet. Make sure to have tartar sauce on the side.
If there are any leftovers – get ready…. they make great ‘fish filet’ sandwiches the next day!” (Make sure you use toasted Italian bread, melt some provolone cheese – add a bit of tartar sauce). YUM!
Buon Appetito
