Tucker Financial Weekly Market Review: December 6th, 2024

Weekly Market Report: December 6th, 2024

Markets last week took in stride a relatively full economic calendar and some overseas political drama in Asia (South Korea), Middle East (Syria), and Europe (France). Upbeat narratives surrounding the holiday shopping season, renewed China stimulus sentiment, and measured cooling of the U.S. labor market translated to marginal gains across global equity markets with a narrow rally in the U.S. (+1%) and participation across both developed and emerging markets, both rising approximately 1.4%. Interest rates declined slightly with some curve flattening as short rates fell more than long rates. Commodities were relatively unchanged on the week with some weakness in oil/gas prices while the USD posted a marginal 0.30% gain for the week.

Market Anecdotes

  • A new record high for the S&P 500 last week puts the headline index at a 28% gain for the year, a rally driven by large cap growth stocks but not one foreseen by most Wall Street strategists.
  • Bespoke noted last week marked the two-year anniversary of OpenAI’s release of ChatGPT, a window where we’ve seen a remarkable boom in market caps, revenues, operating cash flows, and overwhelmingly unexpected earnings.
  • The valuation gap created by small caps lagging large caps by 10% this year and 40% since the end of 2019 prompted a Furey Research Partners research note highlighting the strong historical probability (96%) of small caps outperforming large caps over the next five years.
  • A new research piece from Robert Shiller titled “U.S. Crash Confidence Index” indicated a very high level of investor comfort and complacency, a cautious narrative amidst the current backdrop of record high equity markets.
  • The market’s reaction to Friday’s jobs report may have been more focused on prior month revision announcements than the headline number given hurricane and strike related disruptions in the October report.
  • A flurry of Fed speeches last week in advance of the blackout period echoed sentiments surrounding stubborn inflation sticking above target and tight but cooling labor markets.
  • The U.N. FAO reported global YoY food prices up 5.7%, a concerning development for global stability as well as the consumer in general who experience food prices much differently than the simple year over year growth rate we monitor as investors.
  • OPEC last week decided for a third time to push back unwinding production cuts to April of next year citing market fundamentals and likely the specter of U.S. production capabilities.
  • A political crisis unfolded in South Korea last week with President Yoon targeting the opposition by declaring a crisis and attempting to instill martial law. Korea joins Russia-Ukraine, internal conflict in Syria, Israel-Iran armed conflict, and China-U.S. trade in the geopolitical risk landscape

Economic Release Highlights

  • October Payrolls beat consensus (227,000 vs 211,000) while the Unemployment Rate increased to 4.2%. Average Hourly Earnings came in slightly ahead of forecast with MoM 0.4% vs 0.3% and YoY 4.0% vs 3.9%.
  • The October JOLT Survey reported 7.744M openings, above the spot forecast (7.490M) and consensus range (7.287M to 7.550M) with a vacancy rate unchanged at 4.6%. The quits rate moved higher overall but remained steady in the private sector.
  • The November ISM Manufacturing Index came in slightly above forecast (48.4 vs 47.6). The ISM Services Index came in below the spot forecast (52.1 vs 55.5) and range of estimates (54.0-57.5).
  • The November JPM Global Manufacturing PMI improved slightly from 49.4 to 50.0 while the Services reading stayed at 53.1. The Composite reading climbed one tick to 52.4.
  • The UofM Consumer Sentiment Index registered 74.0, slightly above the spot forecast while one-year forward inflation expectations increased from 2.6% to 2.9%.
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: November 29th, 2024

Weekly Market Report: November 29th, 2024

Markets packed a busy economic calendar into a Thanksgiving holiday shortened week with global equity markets again posting solid gains and bond markets rallying on falling yields. Easing of tariff worries and a continued Israel-Hezbollah ceasefire allowed geopolitical temperatures some breathing room last week as speculation on the path of inflation and Fed policy continued. The S&P 500 closed up 1.1%, marking a new record high, and capping its best monthly performance in a year. International developed markets gained 2.2%, boosted by a weakening USD which fell 1.7% while emerging markets ended the week unchanged. The bond market rallied nicely thanks to a notable decline in bond yields where 5yr to 30yr maturities fell 25 bps, leaving the 10yr UST yield at 4.18%.

Market Anecdotes

  • An eventful month of November is now in the books where global equity markets favored the U.S. and smaller companies in particular with returns for growth and value stocks very similar.
  • With the year-end fully visible now that we’re into December, a fresh look at Mag 7 earnings and the S&P 500 reinforces the narrative in the rear view but poses some questions looking forward.
  • The current 10yr bond yield is sitting right at average levels of the past year and well within the “soft landing” range of 3.80% to 4.60% where yields falling below this range may suggest rising recession risks and yields rising above may suggest rising inflation risks.
  • Concern over high budget deficits and outstanding government debt are tangible given the trajectory of the past 25 years but spending cuts, economic growth (the denominator), and new tariff tax revenue warrant careful attention as investors consider deficits and debt going forward.
  • Inflationary fiscal stimulus (growth), tariffs (taxes), and immigration (labor supply) may result in short term price pressures and a strong USD but may ultimately slow the economy and reduce price pressures – a sentiment reflected in short versus long term inflation expectations.
  • Torsten Slok pointed out a common misconception in economics, stock/level versus rate of change by noting while YoY inflation is near 2% the overall price level is 22% higher than pre-pandemic 2020.
  • The first formal volley of threatened tariffs from POTUS elect came last week as 25% across the board on Canada and Mexico and 10% on China. Equity and bond markets called their bluff while FX markets blinked. Implications across earnings, USD, fiscal policy, and inflation warrant consideration.
  • Treasury Secretary Scott Bessent touted a reasonable version of an Abenomics principle, “3-3-3”, which seeks 3% budget deficits, 3% GDP growth, and incentivizing an additional 3mm barrels of oil production. Bessent has also made clear his willingness to challenge Fed independence.

Economic Release Highlights

  • Headline and Core PCE inflation were right in line with consensus estimates at 2.3% and 2.8% YoY respectively. MoM readings were 0.2% and 0.3% respectively.
  • PCE was in line at 0.4% MoM (3% YoY) while Personal Income grew 0.6% MoM (2.7% YoY), well above the spot forecast of 0.3% and estimated range of 0.1% to 0.4%.
  • The second reading of 3Q GDP was unchanged at 2.8% but personal consumption expenditures were revised slightly lower from 3.7% to 3.5%.
  • Durable Goods Orders for October grew 0.2%, below the spot consensus of 0.5% but within the forecast range. Ex-Transports grew 0.1% and Core Capital Goods declined 0.2%.
  • Consumer Confidence improved in November, rising from 109.6 to 111.7, slightly behind the spot forecast but within the consensus estimate range.
  • New Home Sales for October declined from 738k to 610k, a larger decline than the spot forecast of 725k and below the consensus range of 710k-750k. Pending Home Sales rose 2.0%, well above the spot consensus of -1.8% and range of -2.1% to 0.4%.
  • Case-Shiller Home Price Index reported home prices rising 0.2% MoM and 4.6% YoY, both generally in line with consensus forecasts.
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: November 22nd, 2024

Weekly Market Report: November 22nd, 2024

Global equity markets rebounded last week with U.S. (+1.7%), developed international (+0.60%), and emerging markets (+0.80%) all posting solid gains in what was a relatively uneventful week. The yield curve flattened marginally leaving the 10yr relatively unchanged at 4.41% while 1yr and 2yr yields increased 8 bps and 6 bps respectively. The USD (+0.81%) and commodity markets (+3.80%) strengthened with a strong U.S. economy likely underpinning both moves.

Market Anecdotes

  • Equity markets again exhibited signs of internal rotation with small caps and cyclicals outperforming large technology names, an area where markets have placed remarkable valuation premiums over the past two years.
  • Markets put a bow on the third quarter earnings season last week with 3Q YoY growth in the U.S. of approximately 7%, ahead of developed markets but behind emerging markets.
  • FactSet looked at 3Q geographic based earnings data, challenged the idea that a strong USD translates to weaker earnings results for companies with larger international exposure highlighting that the 5.4% blended 3Q S&P earnings growth is comprised of U.S. centric companies who grew earnings by 1.9% and global companies growing at a 12.9% rate.
  • The most recent VerityData tally of insider sales show activity at a record high, surpassing the last record high set in November 2016.
  • NY Fed data on credit card delinquencies show the third quarter new delinquencies declined for the first time since 2021 by 0.26% to a still elevated 8.79%, a trend we’d like to see continue.
  • Japan and China unloaded record sums of UST in 3Q adding to the trend of foreign central bank selling and foreign private investors buying, who have become the largest holders of U.S. debt.
  • With continued upside economic surprises and FOMC minutes due this week, markets are viewing the probability of a December 18th rate cut as a coin toss with futures priced at 55% but swaps (OIS) priced at 41% and approximately three cuts expected over a year.
  • A recent study from the SF Fed analyzed three measures of ‘labor tightness’ including vacancies to unemployment, vacancies to effective searchers, and headline unemployment concluding the former two remain one standard deviation above average while U3 is one below.
  • Bloomberg reports the BLS will be releasing new labor market survey data that attempts to capture workers in the gig economy where estimates range from 5% to 30% of the total workforce.
  • Viewing tariff issues as either China centric or ‘universal’ seems reasonable with the former most likely. A study from the Peterson Institute points out that while the economy can more readily absorb tariff inflation pressures, border issues and Fed independence are another story.
  • Extending the TCJA will require approximately $3.9t over 10yrs before getting to Trump’s campaign promises. Strategists predict that it will be cut to 5yrs/$1.9t with 50% to the deficit and 50% offset, a portion likely sourced from ‘off budget’ executive action tariff tax revenue.

Economic Release Highlights

  • November’s U.S. flash PMI (C,M,S) improved from the prior month and came in above forecasts at 55.3, 48.8, 57.0.
  • November’s EU and U.K. flash PMI report (C,M,S) declined from the prior month and came in below forecasts with the EU at 48.1, 45.2, 49.2 and the UK at 49.9, 48.6, 50.0.
  • The final reading for UofM Consumer Sentiment in November was revised lower from 73.0 to 71.8 while 1 yr inflation expectations were unchanged at 2.9%.
  • November’s Housing Market Index registered 48, well above the prior month reading and spot consensus both of which were 43.
  • Existing Home Sales in October came in at consensus 3.96M, up 3.4% MoM and 2.9% YoY.
  • Housing Starts (1.311M) and Permits (1.416M) for October decreased slightly versus prior month but registered at the consensus forecast.
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: November 16th, 2024

Weekly Market Report: November 16th, 2024

Markets last week took in a relatively light economic calendar, the last leg of 3Q earnings reports, and refocused on inflation/Fed/interest rate dynamics. A new batch of inflation data and post-election policy speculation translated to some consolidation of recent equity market gains and a renewed drift higher in interest rates on the week. Most U.S. equity indices notched fresh record highs on Monday but went on to close down for the week. The S&P 500 was down 2% and small caps gave back 4% while developed (-2.5%) and emerging (-3.8%) both fell slightly more thanks in part to a 1.6% rally in the USD. Interest rates moved higher across the curve with 10yr yields closing up 13 bps to close at 4.43% while commodity markets lost 2% where we saw WTI oil drop nearly 5% to $67.02.

Market Anecdotes

  • Post-election markets are taking shape as they await details on immigration policy, tax cuts, deregulation priorities, Fed policy, and trade tariffs with the expectation that many campaign proposals will likely be moderated as they become actual policy proposals.
  • Bloomberg noted that European stocks are on pace for their worst performance relative to U.S. stocks since 1995 with growth, currency, and policy dynamics all significant factors.
  • The CPI report last week renewed attention to Fed policy. We’ve seen 2yr inflation breakevens, which bottomed out the week before the first rate cut, increase 1.1% over the last 45 days thanks to resilient growth and the “reflationary cocktail” of tax cuts and tariffs.
  • Fed speaking engagements last week served to further temper market expectations for rate cuts given the stubborn inflation backdrop of the past few months and renewed policy uncertainty following the Republican sweep in DC.
  • With 3Q earnings season set to end this week, we are sitting on 8.6% bottom line growth (11% ex-energy) for full CY 2024 forecast of $242 and CY 2025 of $270-$275, a bit of a tightrope with forward multiples tracking at 22x and most other valuation metrics pretty stretched.
  • A cut in the corporate tax rate from 21% to 15% is highly probable and effectively falls right to the bottom line. While markets have certainly been pricing this in, a note from Goldman might explain why small caps were the biggest benefactor of the policy change.
  • An FT article highlighted new laws in China designed to retaliate against countries waging trade wars by blacklisting foreign companies from Chinese markets, employing sanctions, and cutting off supply chains relied upon by American companies.

Economic Release Highlights

  • CPI rose in line with expectations across the board with YoY headline and core at 2.6% and 3.3% with MoM at 0.2% and 0.3%.
  • Retails Sales in October grew 0.4%, slightly ahead of the 0.3% forecast while the Ex-Autos (0.1% vs 0.3%) and Ex-Autos & Gas (0.1% vs 0.4%) readings both missed.
  • Third quarter European GDP grew 0.4% QoQ, 0.9% YoY while the U.K. reported 0.1% QoQ and 1% YoY growth.
  • The October NFIB Small Business Optimism Index edged up to 93.7 from 91.5.
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: November 8th, 2024

Weekly Market Report: November 8th, 2024

Last week markets took in a relatively light economic calendar but a full slate of corporate earnings reports, an important FOMC meeting, and the results of highly anticipated elections in the U.S. All four aspects, particularly the latter, contributed to a strong week for equity markets and a volatile week for bond markets. The S&P 500 (+4.7%) notched another new record high, breaking the 6,000 mark for the first time in the process. International developed and emerging equity markets both ended the week relatively flat thanks in large part to a strengthening USD. Bond yields surged mid-week but proceeded to unwind and close the week as 10yr yields closed down 7bps on the week.

Market Anecdotes

  • Equity markets enjoyed an unwind of election hedges, VIX/MOVE retreats, favorable seasonality, stock buyback momentum, and a healthy dose of election related FOMO/animal spirits. Bond and currency markets endured a mid-week scare but ultimately settled relatively flat.
  • Immediate market reaction to the RRR complexion in DC was a selloff in the bond market accompanied by a surge in the USD and small caps due to higher probabilities of tax cuts and tariffs. As the week drew to a close, equity markets retained gains and bond markets ended flat.
  • Longer term, the degree of policy pragmatism and economic implications will dictate market outcomes. Positioning for short term equity market strength and bond market weakness with a close eye on yield impact on equity markets and policy development feels right.
  • Last week’s FOMC meeting was lacking in suspense as markets received precisely what they expected, a 25- bps rate cut. However, the backdrop moved further away from one warranting the aggressive rate cuts priced in at the beginning of the year given labor and inflation trends.
  • Expectations for Fed policy as expressed in futures and prevailing interest rates have clearly signaled risks of a dovish mistake with rate cut expectations now less than 4 cuts in the coming year, the 3m/10yr slope moving toward uninverting, and long-term bond yields rising sharply.
  • Monetary policy in the U.S. has shifted focus from taming inflation to working toward an orderly cooling of the tight labor market and contained long-term inflation expectations have likely bolstered Fed confidence in doing so.
  • An FT article made note that the strong U.S. economy backed by the consumer carries record high income gaps where the top 20% account for 40% of all spending and the bottom 40% account for 20% of all spending.
  • We’re now at the 91% mark of S&P 500 3Q earnings reports with blended top and bottom lines of 5.5% and 5.3%, respectively, in what can still be categorized as mixed outcomes due in large part to beat margins of only 4.5% coming in lower than usual.
  • An article in the FT highlighted rising risks of re-defaulting instances in CRE following the unprecedented ‘extend and pretend’ trend of loan modifications by U.S. banks in response to commercial real estate stress.
  • Chinese stimulus details announced last week were centered on a $1.4t local government bond swap, a larger than anticipated figure but still centered on stabilization rather than stimulus.
  • Money market/SOFR rates surged at the end of Q3, drawing renewed attention to the FOMC quantitative tightening initiative which has reduced the size of the Fed balance sheet by a historic $2t since June 2022.

Economic Release Highlights

  • The October ISM Services Index improved from 54.9 to 56.0, beating the spot forecast (53.5) and coming in above the consensus range of 53.0 to 55.8.
  • The JPM Global Composite PMI readings improved in November with Services (52.9 to 53.1) and Manufacturing (48.8 to 49.4) taking the Composite reading to 52.3.
  • The UofM Consumer Sentiment Index for November came in above consensus (73.0 vs 70.8) and 1yr inflation expectations declined from 2.7% to 2.6%.
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: November 1st, 2024

Weekly Market Report: November 1st, 2024

The last week of October packed in a good deal of market impactful news flow with a heavy calendar of corporate earnings and economic reports combined with the home stretch of the U.S. election cycle. The S&P 500 closed down 1.4%, a second consecutive down week, while developed (-0.63%) and emerging (-1.4%) international markets both lost ground as well. Treasuries were down again as interest rates continued to grind higher, pressing the 10yr yield up to 4.37%. Oil traded back down below $70, taking the commodity complex down approximately 2% on the week.

Market Anecdotes

  • While the soft landing/no landing bullish narrative is still intact, risk appetites have been tempered the past couple of weeks thanks to the backdrop of rising bond yields and election uncertainty.
  • Seventy percent of S&P 500 companies have reported earnings with results somewhat mixed overall. Blended earnings growth stands at 5.1% with beat rates and margins at 75% and 4.6% respectively. Revenue growth is at 5.2%.
  • The Fed members were quiet last week in anticipation of this week’s FOMC meeting where markets are pricing a 99% probability of a 25-bps rate cut.
  • With U.S. elections looming, BCA forecasters are leaning (55%) toward a Trump win with “Red Sweep” odds increasing to 47% and “Blue Gridlock” odds at 53%. There are several higher conviction investment implications to consider.
  • China’s stimulus details were leaked last week at CNY 10t bond issuance over three years, 60% to boost local government balance sheets and 40% to buy raw land and housing. Meanwhile, anti-corruption crackdowns are rising.

Economic Release Highlights

  • PCE inflation saw YoY headline (2.1% vs 2.1%) and core (2.7 vs 2.6%) both generally inline with forecasts. MoM headline (0.2%) and core (0.3%) both came in right at the spot forecast.
  • Personal income growth of 0.3% increased from August’s 0.2% but came in slightly below the 0.4% estimate while Personal Consumption Expenditures of 0.5% beat the 0.4% estimate.
  • October payrolls missed sharply with only 12,000 reported jobs, well below the spot forecast of 125,000 and range (57,000 – 180,000). The unemployment rate stayed at 4.1%. Average hourly earnings were generally in line with estimates at 0.4% MoM and 4% YoY.
  • The Employment Cost Index (ECI) for Q3 rose 0.8%, slightly below consensus estimate of 1% but within the forecast range (0.7% to 1.0%). YoY ECI rose 3.9%, less than the 4.1% forecast.
  • The JOLT Survey for September registered 7.443M job openings, well under the spot consensus of 7.900M and the forecast range of 7.8M to 8.0M.
  • The initial 3Q U.S. GDP estimate came in slightly below forecast (2.8% vs 3.0%) while PCE exceeded (3.7% vs 3.0%) and came in above the high end of the forecast range of 2.0%-3.6%.
  • The October ISM Manufacturing Index registered 46.5, below the consensus forecast of 47.6 while the final PMI Manufacturing index was revised up from 47.3 to 48.5.
  • The Consumer Confidence Index in October jumped from 98.7 to 108.7, well above the spot forecast of 99.1 and consensus range of 97.7 to 100.5.
  • Pending Home Sales jumped 7.4% MoM, well above the 1.0% expectation with the index climbing from 70.6 to 75.8.
  • The Case-Shiller Home Price Index rose 0.4% MoM in August, up 5.2% YoY.
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: October 25th, 2024

Weekly Market Report: October 25th, 2024

Markets enjoyed a relatively quiet week as October draws to a close with 3Q earnings season and a modest economic calendar the primary drivers. One might be wise to enjoy the quiet before things heat up on the economic calendar next week and we’re a little over one week from the election, which may, unfortunately, mark the beginning of several weeks of political uncertainty. The S&P 500 snapped a 6-week winning streak, closing down 1% while small caps (-3%), developed international (-2.5%), and emerging markets (-1.75%) traded further to the downside. Bond yields continued to grind higher pushing the 10yr UST yield up to 4.25%, still 60 bps below levels from one year ago but up notably from October 1st level of 3.74%. Commodities (+2.7%) and the USD (+0.74%) both closed up on the week.

Market Anecdotes

  • Q3 S&P 500 earnings season is 37% complete with beat rates and margins of 75% and 5.7%, respectively. Blended earnings growth stands at 3.6% and revenue growth at 4.9%.
  • The recent BoA survey data has seen the likelihood of a ‘hard landing’ near its lowest level of the past 18 months with expectations of a ‘no landing’ scenario increasing notably and a clear consensus expectation of a ‘soft landing.’
  • Hawkish FedSpeak narratives continued last week with futures markets continuing to moderate expectations of FOMC rate cuts, now down to roughly 1.25% (5 cuts) over the next 12 months.
  • 10yr UST yields rose above 4.2% for the first time since the summer as yields continue to grind higher following the September FOMC rate cut.
  • The no landing scenario likely implies higher interest rates stemming from increasing inflationary pressures which, history suggests, may present challenges to equity markets.
  • Torsten Slok notes that while higher market interest rates would suggest higher corporate debt servicing costs, companies taking steps to lock in low QE and post pandemic rates have seen non-financial corporate net interest payments decrease to near record low levels.
  • The dominance of the U.S. stock market relative to non-U.S. stocks has been remarkable, with the former outpacing the latter in eight of the past ten years. Looking at the next 10 years, valuations, currencies, and nominal bond yields may present challenges to a repeat.
  •  A long-term look at home affordability from Bianco Research reminded investors that, while first time home buyer affordability today is clearly an outlier, the ultra-low interest rate QE era may not be the best relative comparison.

Economic Release Highlights

  • October U.S. flash PMI (C,M,S) registered (54.3, 47.8, 55.3), in line with the consensus forecast and prior month levels.
  • October Eurozone flash PMI (C,M,S) registered (49.7, 45.9, 51.2), meeting expectations but the composite survey remained below the 50 expansionary mark.
  • Durable Goods Orders declined 0.8% in September, slightly more than the -0.5% spot forecast while the ExTransportation figure beat expectations (0.4% vs -0.1%).
  • The final UofM Consumer Sentiment Index was revised up from 69.0 to 70.5 while one-year inflation expectations declined from 2.9% to 2.7%.
  • New Home Sales in September registered 738k, slightly above the consensus forecast (718k) and prior month (709k).
  • Existing Home Sales in September came in relatively in line with the spot forecast (3.84M vs 3.90M), -1% MoM and -3.7% YoY.
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: October 18th, 2024

Weekly Market Report: October 18th, 2024

Markets last week took in an early leg of third quarter earnings reports, several policy announcements, and a small but somewhat encouraging roster of economic reports. Domestically, the S&P 500 (+0.85%) closed higher for a sixth consecutive week and small caps continued to shine, closing up 2% on the week. Developed and emerging international markets both closed down by 0.44% and 0.95%, respectively thanks in part to continued strength in the USD. Bond yields stayed relatively flat with 2yr and 10yr yields closing at 3.95% and 4.08%, respectively. Crude oil fell back below the $70 level last week to close at $69.35.

Market Anecdotes

  • Early stages of third quarter earnings are getting off to a mixed beginning with above average beats but below average beat margins. Blended earnings and revenue growth rates are currently at 3.4% and 4.7%, respectively.
  • Recent price action across small cap U.S. stocks may reflect an increasing probability of the soft landing scenario taking shape.
  • Continued strength in various economic reports has taken the Atlanta Fed GDPNow forecast for 3Q GDP up to 3.4%, well above the generally expected potential growth rate of 2.0%-2.5%.
  • Pricing across Morningstar high yield distressed bond data reinforces the idea that credit markets do not see reason for concern based on trends in the numbers, size, and quality of issuers in the space.
  • Last week markets received details on various support measures from the PBOC, MoF, and Housing Ministry in China that seem to have impacted the domestic stock market more so than the economic growth outlook.
  • Eleven Fed speaking engagements last week served to guide markets toward a more hawkish stance with regard to expected future monetary policy moves.
  • The ECB delivered what markets were expecting, a third 25 bps rate cut to the refi and deposit rates, taking them down to 3.4% and 3.25% respectively. Meanwhile, the BoJ has retreated from their brief window of hawkish policy, with the Yen weakening accordingly.
  • Updates on U.S. election predictions from our research outlets are seeing an increasing likelihood of a Trump victory, heightening the specter of unified control in DC.

Economic Release Highlights

  • Retail Sales in September came in above consensus forecasts for Headline (0.4% vs 0.3%), ex-Vehicles (0.5% vs 0.1%), and ex-Vehicles & Gas (0.7% vs 0.3%).
  • Industrial Production in September came in below the spot forecast (-0.3% vs -0.1%) and saw both manufacturing output and capacity utilization come in under consensus.
  • The Housing Market Index for October registered 43, slightly under the expected forecast of 42.
  • Housing Starts (1.354M vs 1.400M) and Permits (1.428M vs 1.500M) both came in slightly below their respective consensus forecasts.
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: October 11th, 2024

Weekly Market Report: October 11th, 2024

Markets last week kicked off a nice start to the third quarter earnings season and took in several key economic reports. U.S. equity market momentum continued with the S&P 500 marking a fifth consecutive positive week on top of notching its 45th record high for the year and its first close above 5,800. Developed (-0.30%) and emerging (-1.3%) international markets had to contend with nine consecutive days of a strengthening USD, posting slight losses on the week. Stocks have been resilient in the face of rising yields where we’ve seen the 10yr yield increase nearly 35 bps over the past eight sessions, leaving the 10yr handily over the 4% level, to 4.08%.

Market Anecdotes

  • U.S. equity markets maintained their positive momentum, thanks in part to a constructive start to earnings season. Elevated global uncertainty and a notable move higher in bond yields have yet to capture investor attention in the short term.
  • With third quarter earnings season now underway, companies in the S&P 500 are expected to grow the bottom line by 4.1% but factoring in historical beat margins, FactSet estimates growth rate will be closer to 9.5%-10%.
  • Healthy growth dynamics and last week’s warmer than expected CPI report served to reduce odds of another 50 bps rate cut by the Fed next month.
  • With the two-year anniversary of the bull market now in the book, Strategas highlighted the historically average performance of large caps (S&P 500 60.8% vs 60%) and historically below average performance of small caps (Russell 2000 29.9% vs 76.9%) with year 3 to be determined.
  • BCA’s geopolitical research pointed out a Harris administration is much more likely to be gridlocked than a Trump administration with markets yet to price in the impacts of sharp immigration curbs, major tax cuts, or global trade wars.
  • U.S. government spending increased 10% in FY 2024 while tax revenues increased 11% but the deficit increased by $139b, thanks to interest payments on outstanding debt increasing 34%.
  • ETF fund flows show retail investors chasing the surge in China’s equity market with nearly $9b of inflows to China funds, well above the next highest inflow of $1.8b to investment grade credit.
  • BCA noted China’s aggressive energy independence push toward nuclear energy poses risks to U.S. dominance in the space where China’s installed capacity just over the past 10 years represents nearly 50% of current installed U.S. capacity.
  • A follow-up to last week’s musings about survey response rates and the prevalence of multiple job holders relative to its longer-term trend shows in fact, response rates have fallen and levels of multiple job holders are at their highest point dating back to 1995.

Economic Release Highlights

  • The September CPI report came in a bit warmer than consensus forecast with YoY readings of Headline (2.4% vs 2.3%) and Core (3.3% vs 3.2%) and MoM readings of Headline (0.2% vs 0.1%) and Core (0.3% vs 0.2%).
  • Headline PPI in September rose YoY (1.8% vs 1.6%) and MoM (0% vs 0.2%) while core readings were up YoY (2.0% vs 2.7%) and MoM (0.2% vs 0.2%).
  • Consumer Sentiment declined slightly in October to 68.9 from 70.1 while 1-year ahead inflation expectations increased from 2.7% to 2.9%. 
  • The September NFIB Small Business Optimism Index was mostly flat versus the prior month at 91.5.
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: October 4th, 2024

Weekly Market Report: October 4th, 2024

Markets last week received a nice dose of constructive economic reports as well as a not so nice dose of geopolitical turmoil which translated to mixed equity market outcomes. The large cap S&P 500 closed up slightly while small caps were down slightly on the week. International developed markets traded down 1.6% thanks in part to a healthy 2.1% rise in the USD while emerging markets closed up 0.77% as China (+11%) continued to rally on the prior week’s stimulus announcements. Bond markets saw yields jump sharply higher, pushing the 10yr UST back up to nearly 4%, while WTI crude oil surged over 9% on notably increased odds of more widespread and prolonged conflict in the Middle East.

Market Anecdotes

  • The strong PMIs and labor report last week moved Fed Funds rate cut expectations decidedly back toward a 25 bps cut on November 7th, triggered a rally in the USD, moved U.S. Treasury yields sharply higher, and the entire Treasury curve last week on constructive economic reports
  • The U.S. and Federal Reserve have plenty of company across developed markets as other central banks are pivoting to rate cuts in response to waning inflation and growth concerns.
  • U.S. GDP, which has only seen one quarter since Q2 2022 where the economy posted growth below the 2.0- 2.5% long run potential, is bolstering those in the “no-landing” camp.
  • A historical look from Market Desk and Ned Davis at prior rate cut cycles and ensuing returns for the S&P 500 reminds how important it is to get the call on the economy correct and that the bull market, at only two years old, is far from dying of old age.
  • Conflict in the Middle East was again on full display last week between Israel and her adversaries leading to a surge in oil prices and increasing uncertainty across the region.
  • Improving prospects for China on the back of recent stimulus announcements and implications for a weaker USD have placed more attention on developed international equity markets and Europe in particular with relative valuations providing additional support.
  • A tentative agreement was reached between dock workers on the East and Gulf coast ports but there was no discernable market reaction given the short duration of the conflict.
  • The $1.5t wall of loan maturities across the U.S. commercial real estate market presents a wide array of challenges and opportunities in what will likely be a slow evolving recovery.
  • The U.K’s Office of Budget Responsibility published work on the fiscal impact of migrants at different wage/skill levels showing high and middle income migrants are net positive contributors to the government purse whereas the average U.K. resident and low income migrants are net negatives.

Economic Release Highlights

  • The September jobs report was a blockbuster with 254,000 new jobs, well above the spot forecast of 132,000 taking unemployment down from 4.2% to 4.1%.
  • Average Hourly Earnings grew above estimates for both MoM (0.4% vs 0.3%) and YoY (4.0% vs 3.7%) and Labor Market Participation stayed at 62.7%.
  • The August JOLT Survey showed 8.040M job openings, an increase over the prior month’s 7.63M and well above the spot forecast of 7.7M.
  • The September ISM Services Index registered 54.9, well above the prior month and consensus forecast where both were 51.1.
  • The September ISM Manufacturing Index registered 47.2, unchanged from the prior month and slightly below consensus forecast of 47.6.
  • The JPM Global Manufacturing PMI registered 48.8, down from the prior month read of 49.5. The Composite and Services readings both deteriorated from 52.8 to 52.0 and 53.8 to 52.9.
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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