Things you need to know.
– And so, it begins (again).
– Futures whipsaw but are higher this morning.
– Bitcoin surges then declines then surges again.
– JPM says – Trump is ‘very pro-business and US economy is in “GO” mode.
– 25% Tariffs on Mexico & Canada on February 1?
– World Economic Forum Boondoggle kicks off in Davos.
– Try the Chicken Boscaiola.
U.S. stocks were up on Friday and had their best week since the 2020 presidential election. On Friday – The Dow gained 335 pts, the S&P up 60, the Nasdaq gained 290 pts, the Russell up 10, the Transports bucked the trend and lost 170 pts while the Equal Weight S&P added 35 pts. (again, note the difference between the S&P Market cap weight and the Equal Weight’s performance) – The mega-cap tech names helping the S&P to outperform.
The moves on Friday and for most of the week were helped by easing inflation data, strong earnings from financial companies, and optimism surrounding Trump’s pro-growth policies – think tax cuts and trade reforms along with less regulatory ‘choke’. The Mag 7 index surged by 1.7%, with NVDIA +3.1%, Tesla +3%, AMZN + 2.4%, leading the pack. INTC surged by 9% on the idea floated by ‘Semi Accurate’ a tech-focused newsletter of some ‘mystery’ company looking to ‘acquire Intel’ – conveniently not naming who the ‘mystery’ company was.
It was also the official beginning of the earnings season – and the big, diversified banks kicked it off BIG, causing the markets and the banks to surge on the week – JPM +8%. C +13%, GS +12%, MS + 13%, BAC + 4%, the XLF gaining 4.4%, the KBE + 8%, even the regional banks joined in the fun – the KRX rising nearly 9% on the week.
Analysts were quick to point out that the market’s recovery grew from oversold conditions and renewed investor confidence about the pace of inflation. However, some – myself included continue to caution against being too excited as risks like high valuations, creeping inflation and reliance on mega cap tech stocks continue to cause concern.
Of the 11 S&P sectors – Information Technology and Consumer Discretionary both up more than 1.5%, Financials, Communications Industrials, Consumer Staples, Energy and Basic Materials were all higher by between 0.5% – 0.9%. Healthcare and Real Estate ended the day lower.
Nearly everything else was up….Homebuilders + 0.4%, Retail + 0.25%, Airlines +0.7%, Disruptive Tech +1.5%, the SPXL (triple levered S&P Long) gained 2.8%, the Value trade gained 0.7%, the Growth trade up 1.3%, Metals and Miners + 0.9%, Semi’s gained 2.8%, even the VIXY gained 0.6%, which you say is odd because the VIXY is usually seen as a contra trade, considering the VIX was flat and stocks surged – but maybe it wasn’t – you see – while the VIXY usually trades in tandem with the VIX, the prices of these futures contracts (VIXY) are also influenced by market expectations of future volatility meaning, that while Friday’s volatility was muted – traders and some investors are anticipating higher volatility in the near future. Just sayin’.
And as you would also expect – the contra trades were all lower…. the DOG lost 0.7%, the SH – 0.9% and the PSQ gave up 1.6% while the SPXS (triple levered short) lost nearly 3%.
The eco data on Friday was also a winner – Housing starts soared, rising 15.8% m/m while Building Permits – which were expected to be down 2.2% came in at down 0.7% – a clear win. Industrial Production rose 0.9% vs. the expected 0.3% and well above last month’s revised +0.2%. Capacity Utilization rose to 77.6%.
Bitcoin – has done nothing but surge in the new year as inauguration day approached – Yesterday, it traded up and thru $109k only to retreat. This morning it is trading at $103,000. Ethereum is trading at $3,300, while XRP is churning at $3.09.
Oil which had traded up and thru $80 on January 15th after Jo Jo imposed last minute sanctions on Russia is now in retreat – as investors and traders focus on what Trump sees as ‘new energy policy’. In the hours after he took over, he launched ‘a sweeping overhaul’ of our energy policy – directing the gov’t to ‘drill baby drill’ as he declared an ‘energy emergency’ – supporting fossil fuel production while also pulling out of the Paris Climate Accord. Oil is down $1.70, trading at $76.20. If oil continues to weaken – the chart says it should find support at the trendline – $72.60.
Gold which had surged higher as investors and traders assessed and prepared for ‘potential’ market upheaval and trade wars – is in retreat this morning. Gold is down $15 trading at $2733 – taking it below the November and December high of $2750. So, here is the argument – On one hand – the argument is that Trumps policies on immigration, geo-politics and tariffs will create all kinds of uncertainties and tensions and that will cause investors to go for the ‘safety play’ – sending gold higher.
If you flip that argument and do not agree with that thesis and expect the geo-political issues to calm down, the tariffs to not cause out of control inflation and the deportation of Venezuelan gang members to be a good thing – then your assessment is that gold will move lower. My sense is that once Trump moves into the oval office – those fears will in fact subside and gold will retreat back to trendline support in the short term at $2670.
Earnings have gotten off to a good start…. I think we are running at a 90% beat rate after the first full week…- clearly that will change in the weeks ahead – history usually has that metric at about a 75% beat rate. Last week it was all about the big Diversified Banks – This week we will begin to hear from names like
KEY, PLD, MMM, SCHW, DHI, UAL, STX, PG, GEV, ABT, HAL, JNJ, TRV, AA, HXL, KMI, GE, AAL, ALK
and they represent a range of industries that include: Banks, Industrial REITS, Diversified Industrials, Wealth Management, Homebuilders, Airlines, Computer Hardware & Storage, Personal Care, Electric Power Equipment, Medical Devices, Oilfield Services and Equipment, Large Pharma, P&C Insurance, Base Metals, Aircraft & Parts, Midstream – Oil & Gas, – so we will start to get a broader understanding of the health of the economy.
US futures were screaming higher at 8 pm last night, then faded overnight and are now once again up substantially….all as the new administration takes hold and Donny promises a ‘new Golden Age’…..…At 6 am – Dow futures up 150 pts, S&P’s up 22, Nasdaq ahead by 90 pts while the Russell is up 14 pts. Look, in the end – investors, traders and algo’s will be keenly focused on whether or not he can follow thru on all of those campaign promises or whether or not Congress will get in his way because the next move in asset prices will be driven by what happens next.
Eco data this week includes – the Philly FED Non-manufacturing (think services) activity, Kansas City FED manufacturing activity, S&P manufacturing & services PMI’s – Manufacturing expected to be neutral (on the 50 line) while Services continues to be strong at 56.5. Friday brings us Existing Home Sales expected to be up 1.2%.
Speaking about what happens next – the FOMC meeting is front and center – The blackout period for FOMC members begins today, but for the most part we should NOT expect any surprises. The FED has made it very clear – there is no rate cut in the cards this month or for the next couple of months. And while I don’t’ think we will get a rate cut at all; many are still placing their bets on late spring/early summer…. Only time will tell.
European markets are mixed as investors across the pond react to the first round of executive orders signed by Trump yesterday. European car companies are under fire on the threat of US tariffs. In addition – earnings rose by 6% y/y in the period between September-November all while payrolls fell by 0.1% suggesting a weakening labor market. These two data points only cause confusion for the BoE. Recall – the bets across the pond are calling for 3 rate cuts by the BoE this year…. a bit aggressive I think, but I don’t live there.
The S&P ended at 5996 – up 59 pts. 5950 which I thought would offer some resistance, offered none! We are now on the verge of testing the December highs of 6100! I think the concerns over tariffs is overdone – in my view he is using it as leverage to negotiate, but let’s see. While I remain cautious, I am not concerned that the bottom is about to fall out. I am a buyer on weakness. Keeping cash is an investment decision as it is earning 4.5% while it waits and remember you are invested on the balance, if the market rallies, you are participating and when (not if) it declines – you have cash to put to work.
Any questions? Give me a call. Click here https://slatestone.com/contact-us/ to contact me – Put KP in the message box and I will reach out to you to discuss your investment portfolio and any questions you may have.
Take good care.
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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Chicken Boscaiola
This is a classic Italian dish with roots in the countryside of Italy. The name “Boscaiola” translates to “woodcutter’s style” or “forest style,” emphasizing its rustic origins and connection to forest flavors like mushrooms and herbs.
For this you need: Olive oil, 3 cloves of garlic minced, sliced shallots, 1 lb. of fresh mushrooms, frozen peas, chopped fresh parsley, s&p, Italian herbs, 1 lb. of boneless skinless chicken breasts, flour (for dredging), butter, bechamel sauce (butter, flour and milk), white wine, water.
In a large sauté pan add the olive oil, shallots and garlic, cook on low heat for 3 or 4 mins, then add the sliced mushrooms, and chopped parsley, season with s&p and cover. Let cook for a few minutes, then uncover and continue cooking until the mushrooms are tender and slightly browned. Remove and set aside.
Season the chicken pieces with the S&P and herbs then dredge in flour, set aside.
Using the same sauté pan, add the butter and a splash of olive oil, when melted add the dredged chicken, and cook on medium heat, browning both sides. Remove the chicken and set aside.
Add back the mushrooms and add in the frozen peas. Let that cook on low for 5 mins or so. Now add ¼ c of white wine (or chicken stock) and ¼ c of the bechamel sauce, a splash of water and stir to combine. Bring to a boil and lower heat to med low.
Now add back the chicken, cover the pan and let it cook for 20 mins or until the chicken has cooked thru. Stir often so the mixture doesn’t burn, making sure to turn the chicken over at the 10 min mark. Taste for seasoning.
After 20 mins – remove the cover and let thicken if needed or desired. Serve immediately.
Buon Appetito
