Tucker Financial Weekly Market Review: March 15th, 2024

Weekly Market Report: March 15th, 2023

Markets last week took in an economic calendar with additional warmer inflation data points and the associated policy speculation and interest rate volatility. The S&P 500 did mark another record high close (Tuesday) but closed marginally lower on the week (-0.13%, +7.28% YTD) in what was its first back-to-back weekly decline since October. Non-U.S. developed (-0.45%) and emerging (-0.12%) markets both closed slightly lower as well, thanks in part to another week of USD strengthening, at least partially on the “higher for longer” narrative. Bond yields moved notably higher on the week with the 10yr (4.31%) closing back at its February highs. The commodity complex traded broadly higher with WTI oil (+3.88%) and industrial metals both getting solid bids on the week.

Market Anecdotes

  • More questions surrounding the progress and trajectory of inflation dynamics surfaced last week with more warm inflation readings (PPI, CPI) which may or may not translate to Fed policy.
  • Gradually shifting equity market dynamics over the past month includes cyclical leadership and an increase in stocks trading above their 200-day moving average despite a few of the ‘magnificents’ falling over the same time period.
  • Bespoke pointed out that at 517 days, this bull market is sitting exactly at the median bull market duration, but well below the average 1,011 days thanks to the lengthy bull market runs of the past few decades.
  • The FOMC and BoJ both meet this week with the former expected to hold but the latter expected to end its negative short term rates and end its seven year yield curve control program.
  • With spreads in high yield (315) tightening 133 bps and investment grade (94) by 39bps since their near-term October 2023 highs, it begs the question how much lower can they go? The answer of course depends on the economic outlook.
  • A refreshed look at the GDP growth backdrop provides a worthy reminder that falling inflation can paint decelerating nominal GDP growth with a brush of accelerating real GDP growth.
  • Bianco Research pulled one from the vault by revisiting the internet bubble tech sector rise and fall as a history lesson possibly pertaining to the current AI craze. The rise in the market has translated to a self fulfilling rise in bullish sentiment and equity market inflows.

Economic Release Highlights

  • February YOY headline and core CPI registered (3.2% vs 3.1%) and (3.8% v 3.7%) respectively with MOM readings of (0.4% v 0.4%) and (0.4% v 0.3%).
  • February YOY headline (1.6% v 1.2%) and core (2%) PPI along with MOM readings of (0.6% v 0.3%) came in well ahead of expectations.
  • Retails Sales in February were generally in line with consensus on the headline (0.6% v 0.7%), Ex-Vehicles (0.4% v 0.4%), and Ex-Vehicles & Gas (0.3% v 0.2%) readings.
  • February Industrial Production of 0.1% was in line with the 0% spot forecast and consensus range of -0.5% to 0.2%. Manufacturing Output beat on the upside (0.8% v 0%).
  • UofM Consumer Sentiment in March registered 76.5, generally in line with the 77.3 spot forecast and range of 75 to 78.3
This communication is provided for informational purposes only and is not an offer, recommendation or solicitation to buy or sell any security or other investment. This communication does not constitute, nor should it be regarded as, investment research or a research report, a securities or investment recommendation, nor does it provide information reasonably sufficient upon which to base an investment decision. Additional analysis of your or your client’s specific parameters would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any client or portfolio and is not presented as suitable to any other particular client or portfolio.

Tucker Financial Weekly Market Review: March 8th, 2024

Weekly Market Report: March 8th, 2023

Last week markets absorbed a good deal of Fed speak and an economic calendar which lent itself marginally to a higher for longer (firm growth backdrop) narrative. U.S. equity markets exhibited some breadth with the S&P 500, despite marking a new record high, ending the week down 0.26% while most sub-mega cap stocks posted marginal gains. Developed (+1.6%) and emerging (+0.84%) equity markets were both up nicely for the week thanks in part to a weakening USD which gave back 1.11% against a basket of currencies, particularly the Yen. U.S. bond yields declined mostly on the long end pushing the 10yr yields back down below 4.1%. Commodities were mixed with WTI oil down 2.45% to $78 but industrial metals rallied 1%-5% across the board.

Market Anecdotes

  • U.S. equity markets powered by a more sanguine view on interest rates, resilient growth, and the mega cap/ AI craze have bounced a remarkable 26% off the late October 2023 lows, perhaps a bit short term overbought, but a strong tape is a strong tape as they say.
  • A look at 2024 forecasted revenue and earnings growth of 5% and 11% respectively suggests the street may still be a bit optimistic given growth expectations and potential earnings headwinds.
  • Earnings and performance of the companies within the ‘Mag 7’ have seen some dispersion recently which may carry some interesting translations to both active manager performance and market index considerations.
  • The ‘strong tape’ is stronger nowhere more so than the AI fueled semiconductor industry where Bespoke noted 80 consecutive SOX closes at least 3% above its 50-dma, a first ever close above the headline S&P 500 index, but still some very wide dispersion within the index.
  • A look back provides an important reminder of how equity markets, despite some unsettling volatility with 10 ‘ups’ and 10 ‘downs’, can ultimately generate a nice outcome. Similarly, a Bespoke look at credit spreads and subsequent equity market returns reminds us to be greedy when others are fearful.
  • Powell testimony noted policy moves including taking the fed funds from 0% to 5.25% and QT which has reduced the Fed balance sheet from $8.5t to $7.1t have helped bring PCE inflation down to 2.4% (headline) and 2.8% (core) but they remain data dependent on the path forward.
  • Central bank news saw the ECB keep their policy rates unchanged last week while rumors of the BoJ considering an end to its NIRP ( -0.10%) sent some volatility into global bond and currency markets. Higher wages and cooling inflation may give the BoJ room to end the extreme policy.

Economic Release Highlights

  • February payrolls handily beat expectations (275k vs 190k) and the unemployment rate rose from 3.7% to 3.9%. Labor market participation stayed at 62.5% and average hourly earnings was broadly in line with consensus of 4.3% YOY (0.1% MOM).
  • January JOLTS reported a slight decline in job openings to 8.863M.
  • U.S. February ISM Services Index (52.6 vs 53.0) was generally in line with the consensus forecast.
  • The JPM Global Manufacturing PMI improved from 50.0 to 50.3 in February while final non-U.S. PMI (C, S) readings were Eurozone (49.2, 50.2), China (52.5, 52.5), U.K. (53.0, 53.8).
This communication is provided for informational purposes only and is not an offer, recommendation or solicitation to buy or sell any security or other investment. This communication does not constitute, nor should it be regarded as, investment research or a research report, a securities or investment recommendation, nor does it provide information reasonably sufficient upon which to base an investment decision. Additional analysis of your or your client’s specific parameters would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any client or portfolio and is not presented as suitable to any other particular client or portfolio.

Tucker Financial Weekly Market Review: March 1st, 2024

Weekly Market Report: March 1st, 2023

Markets closed out the month of February with the equity markets in the U.S. (+1%) and developed international (+0.78%) posting solid gains. The impressive run in the U.S. large cap space has enabled the S&P 500 to close higher in 16 of the past 18 weeks, something we haven’t seen in over 50 years. Economic data carried a softening tone last week which allowed bonds to rally. Slightly softer U.S. growth data helped Treasuries rally last week taking 10yr yields back down below 4.2% and the USD slightly down on the week. WTI crude oil closed up 2.5% to $79.97, touching the $80 level briefly for the first time since November.

Market Anecdotes

  • A strong start to 2024 with back to back monthly gains despite the hawkish repricing of Fed policy expectations has been notable with consistently favorable financial conditions, resilient growth, and solid earnings from big technology companies leading the way.
  • Markets have priced roughly half of the rate cuts projected at the beginning of the year and are now relatively in line with the FOMC dot plot with the first cut (54% probability) expected in June.
  • A strong labor market, the healthy consumer, and strong productivity growth have contributed to the constructive outlook while disinflation seems to be losing a little steam.
  • A big rally in Chinese stocks feels more like a policy-driven rebound due to several measures intended to prop up the market while macro data has remained lackluster and industrial metals have yet to catch a bid, suggesting patience may be in order.

Economic Release Highlights

  • The pace of headline (core) PCE inflation declined slightly in January and was in line with forecasts, registering 2.4% (2.8%) YOY and 0.3% (0.4%) MOM. Personal Consumption of 0.2% was in line but Personal Income growth of 1.0% was well above the 0.4% forecast.
  •  U.S. ISM Manufacturing Index slipped from 49.1 to 47.8 in February, missing the consensus forecast of 49.5.
  • January Durable Goods Orders declined 6.1%, slightly more than the -4.5% forecast. Also reported were Ex- Transportation (-0.3% v 0.2%) and Core Capital Goods (0.1% v 0.1%).
  • Consumer Confidence in February (106.7 v 115.0) missed and registered below the consensus range.
  • 4Q U.S. GDP was revised down from 3.3% to 3.2% but Personal Consumption Expenditures were revised up from 2.8% to 3.0%.
  • New Home Sales of 661k registered slightly below the consensus forecast of 685k. Pending Home Sales declined 4.9% versus consensus forecast of 0.8% and a range of -2.5% to 4.6%.
This communication is provided for informational purposes only and is not an offer, recommendation or solicitation to buy or sell any security or other investment. This communication does not constitute, nor should it be regarded as, investment research or a research report, a securities or investment recommendation, nor does it provide information reasonably sufficient upon which to base an investment decision. Additional analysis of your or your client’s specific parameters would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any client or portfolio and is not presented as suitable to any other particular client or portfolio.

Tucker Financial Weekly Market Review: February 23rd, 2024

Weekly Market Report: February 23rd, 2023

A President’s Day holiday-shortened trading week with a relatively light economic calendar looked to the ‘AI tipping point’ narrative, encouraging earnings reports, and a continued healthy economic growth backdrop taking U.S. (and Japan!) equity markets to fresh record highs. The S&P 500 closed up 1.7% (6.7% ytd) with non-U.S. markets following suit in both developed +1.9% (2.7% ytd) and emerging +1.8% (1.0% ytd) markets. Bond yields were relatively flat with the 10yr falling 4bps to 4.26% while commodities (-1.4%) and the USD (-0.34%) were down slightly.

Market Anecdotes

  • Early week market consolidation gave way to an AI-related earnings jolt, pushing the S&P 500 up 2% and the NASDAQ up 3%, both to record highs – something we haven’t seen since March 2000.
  • A Bespoke look back at major technology releases in light of the AI momentum led to an analysis of eight ‘AI’ ETFs which contained 67 S&P 500 companies therein and several constructive performance illustrations going back to the ChatGPT release on 11/30/22.
  • Several Fed speaking engagements and FOMC and ECB meeting minutes released last week served to reinforce further hawkish repricing of rate cut expectations which have already fallen from seven rate cuts to approximately three for the year.
  • An article in Bloomberg highlighting an Attom report on the looming issues across commercial real estate showed January foreclosures up 17% MOM and twice as many as January 2023. Meanwhile residential mortgage rates have risen three consecutive weeks, now back to 7.3%.
  • The JPM CEO disclosed a significant ‘estate planning’ move last week in selling $150mm of JPM stock, which based on his prior uncanny timing, investors may be well served to take note.
  • The PBOC announced another surprise policy decision, delivering a record cut to a key mortgage reference lending rate. Markets again were largely unimpressed.
  • BCA’s FX Strategists have modeled the USD as the most overvalued currency across all developed and emerging currencies globally at +19.1%.

Economic Release Highlights

  • January YOY headline and core CPI registered (3.1% vs 3.0%) and (3.9% v 3.7%) respectively with MOM readings of (0.3% v 0.2%) and (0.4% v 0.3%).
  • January YOY headline and core PPI registered (0.9% v 0.7%) and (2.0% v 1.7%) respectively with MOM readings of (0.3% v 0.1%) and (0.5% v 0.1%).
  • Retails Sales in January fell well short of forecast (-0.8% v -0.1%). Ex-Vehicles (-0.6% v 0.2%) and Ex-Vehicles & Gas (-0.5% v 0.2%) also missed.
  • Industrial Production in January missed the spot forecast (-0.1% v 0.2%) as did Manufacturing Output (-0.5% v -0.1%) and Capacity Utilization (78.5% v 78.8%) also fell short.
  • January’s NFIB Small Business Optimism Index declined and came in below consensus forecast (89.9 v 92.4).
  • UofM Consumer Sentiment reading for January registered 79.6, in line with the consensus forecast of 80.0. One year inflation expectation increased from 2.9% to 3.0%.
  • The Housing Market Index for February came in above forecast (48 v 46).
  • Housing Starts (1.331M) and Permits (1.470M) in January both came in below the spot consensus and the forecast range.
This communication is provided for informational purposes only and is not an offer, recommendation or solicitation to buy or sell any security or other investment. This communication does not constitute, nor should it be regarded as, investment research or a research report, a securities or investment recommendation, nor does it provide information reasonably sufficient upon which to base an investment decision. Additional analysis of your or your client’s specific parameters would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any client or portfolio and is not presented as suitable to any other particular client or portfolio.

Tucker Financial Weekly Market Review: February 16th, 2024

Weekly Market Report: February 16th, 2023

Markets last week took in more fourth quarter earnings reports and a relatively heavy economic calendar. Bond markets couldn’t look past the warm CPI and PPI reports, pushing yields up 10-15 bps as questions surrounding the disinflation trend and related monetary policy implications surfaced. Equity markets were mixed as leading technology names took a breather while small caps and value stocks enjoyed a rare bout of leadership. Developed international (+1%) and emerging international (+1.26%) both outpaced the S&P 500 (-0.4%) on the week. Commodity markets were flat despite oil rallying 3%, closing just shy of $80, and the USD was relatively flat.

Market Anecdotes

  • Last week’s inflation report sparked bond yields and more questions surrounding the ‘last leg’ or final stages of getting inflation back to the Fed’s target.
  • Powell’s emphasis on ‘supercore’ CPI, which has risen (YOY) three straight months, contributed to traders pushing rate cuts further out into the future in a higher for longer narrative.
  • With the market being talked out of the 7 rate cuts priced in on January 12th to 4 rate cuts most recently, it begs the question, what exactly drove equity markets 4% higher over this timeframe?
  • Fed speaking engagements last week continued to push back on market rate cut expectations including Bostic, Daley, and Barkin noting ‘messy’ inflation data, ‘more work to do’, and expectations for two (not four) cuts this year.
  • In an eyebrow raising feat, Nvidia overtook Alphabet from a market cap standpoint last week despite the former’s net income being greater than the latter’s revenue. A simple regression of P/E multiples and subsequent five-year returns reminds us that valuations do matter.
  • Fourth quarter earnings season, with 80% of the S&P 500 reported, has a beat rate of 75% and beat margin of 3.9% alongside blended earnings growth of 3.2% and revenue growth of 4.0%.

Economic Release Highlights

  • January YOY headline and core CPI registered (3.1% vs 3.0%) and (3.9% v 3.7%) respectively with MOM readings of (0.3% v 0.2%) and (0.4% v 0.3%).
  • January YOY headline and core PPI registered (0.9% v 0.7%) and (2.0% v 1.7%) respectively with MOM readings of (0.3% v 0.1%) and (0.5% v 0.1%).
  • Retails Sales in January fell well short of forecast (-0.8% v -0.1%). Ex-Vehicles (-0.6% v 0.2%) and Ex-Vehicles & Gas (-0.5% v 0.2%) also missed.
  • Industrial Production in January missed the spot forecast (-0.1% v 0.2%) as did Manufacturing Output (-0.5% v -0.1%) and Capacity Utilization (78.5% v 78.8%) also fell short.
  • January’s NFIB Small Business Optimism Index declined and came in below consensus forecast (89.9 v 92.4).
  • UofM Consumer Sentiment reading for January registered 79.6, in line with the consensus forecast of 80.0. One year inflation expectation increased from 2.9% to 3.0%.
  • The Housing Market Index for February came in above forecast (48 v 46).
  • Housing Starts (1.331M) and Permits (1.470M) in January both came in below the spot consensus and the forecast range.
This communication is provided for informational purposes only and is not an offer, recommendation or solicitation to buy or sell any security or other investment. This communication does not constitute, nor should it be regarded as, investment research or a research report, a securities or investment recommendation, nor does it provide information reasonably sufficient upon which to base an investment decision. Additional analysis of your or your client’s specific parameters would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any client or portfolio and is not presented as suitable to any other particular client or portfolio.

Tucker Financial Weekly Market Review: February 9th, 2024

Weekly Market Report: February 9th, 2023

A light economic calendar last week allowed markets to focus on a full roster of fourth quarter earnings reports and a heavy dose of Fed speak with twelve speaking engagements on the calendar. In a micro over macro week, equity markets pushed to new record highs with the S&P 500 (+1.4%) closing above 5,000 for the first time. Developed markets stayed relatively flat (+0.2%) while emerging markets (+2.4%) benefited from rumors of additional stimulus measures percolating in China which rallied 4.4% on the week. Bond yields have latched onto the sustained growth narrative, rising 10-15 bps in what has been a rough start to 2024. The USD added marginally (+0.18%) to the strength it has seen so far in 2024 (+2.74%) and oil clawed back most of last week’s losses, rising 6.3% for the week, now up 7.2% in 2024.

Market Anecdotes

  • The S&P 500, up 14 of the past 15 weeks, closed above the 5,000 mark for the first time and set a new record high giving financial media types an easy storyline this week. An increasingly narrow rally at the top end of the index is giving some investors pause.
  • David Einhorn pointed out some obvious concerns surrounding the growth of passive (now 53% of U.S. AUM) and algorithmic investing noting “Passive investors have no opinion about value. They just assume everybody else has done the work” and “Algos have an opinion about price, like what is the price going to be in 15 minutes?”
  • S&P 500 earnings results continued to improve from the difficult start with blended earnings growth up to 2.9% with a beat rate of 75% and a beat margin of 3.8%.
  • Rumblings at NYCB have investors worried about regional banks but the balance sheet looks notably different from SVB and FRB situations last March but the slow moving CRE trainwreck most definitely has more chapters to play out.
  • Bespoke noted the two day surge in the 10yr bond yields (+28.4 bps) following the January jobs report is the second largest of the current cycle with the largest being the yield spike leading up to a surprise 75 bps Fed rate hike in June 2022.
  • The FOMC speaking circuit last week pushed back on both timing and scope of market rate cut expectations while reiterating a patient but ultimately easing bias. ISM Services prices paid last week are worth noting with the disinflation trend a key lynchpin for risk assets looking forward.
  • Jobs and PMI readings have taken the most recent Atlanta Fed GDPNow model estimate of 1Q growth up from 3.0% to 3.4%.
  • Last week’s annual BLS CPI revisions, which Fed Governor Waller highlighted the importance of, revealed minor downward revisions to headline Oct-Dec readings but core readings were unchanged.
  • Hulbert Ratings illustrated a clear case of mean reversion with high yield credit spreads as tight as they are today (3.38%) showing the coming 12 or 24 month change favors a clear gap higher.
  • The January senior loan officer opinion survey showed banks continuing to tighten lending standards and terms, more in line with economic downtrends than the uptrend we’re seeing.
  • News of President Xi Jinping’s intent to focus on economic and financial market challenges sprouted some optimism in China for potential government assistance and regulatory measures.

Economic Release Highlights

  • January ISM Services Index beat consensus (53.4 vs 52.1) and registered above the high end of
  • the forecast range (51.5 – 53.0).
  • Initial (weekly) jobless claims were relatively in line at 218,000, moving the 4-week moving average to 212,000.
This communication is provided for informational purposes only and is not an offer, recommendation or solicitation to buy or sell any security or other investment. This communication does not constitute, nor should it be regarded as, investment research or a research report, a securities or investment recommendation, nor does it provide information reasonably sufficient upon which to base an investment decision. Additional analysis of your or your client’s specific parameters would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any client or portfolio and is not presented as suitable to any other particular client or portfolio.
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