• First Word
Thu January 19

Since the S&P 500 intraday low of 3,491 on 10/13, the S&P 500 has rallied ~15%, even after the decline posted on Wed (1/18). The 200-day moving average is 3,975 and this remains an important level. Since April 2022, the S&P 500 has not managed...

When will see next variant? Maybe April 2022?  Stocks still go up even if bonds have a negative year
  • First Word
Wed January 18

Inflation is having its "Volcker moment" as 34% of CPI (by weight) in deflation, the same point in Oct '82. As for "cash is a great alternative," S&P 500 in 10 days exceeds 4% return of cash, "cash"-ites have to wait another 355 days to match the return of stocks.

MACRO CATALYST WATCH: WEDNESDAY 8:30am ET: Dec PPI (Producers Price Index) Core Street +0.1% MoM (was +0.4% last month)PPI Core (ex-food and ex-Energy) should show same type of continual improvement seen in CPI.If Dec is +0.1% or so, this takes 3M annualized to 2.39%, down from 2.69% last month. In...

  • First Word
Fri January 13

The "big news" in December CPI is 59% of components are now in deflation, a leap of 800bp in a single month (50-yr avg 50%). Reason to view this as repeatable low CPIs = easing FCI = falling VIX = rising stocks.

CATALYST WATCH: FRIDAY U Mich Inflation 1-yr is reported 1/13 at 10am ETwe expect inflation expectations could fall below 4% (mid-month) vs 4.4% last month, validating the accelerating leg down in inflation _THE "BIG NEWS" IN DECEMBER CPI IS 59% OF COMPONENTS ARE NOW IN DEFLATION_ Ultimately, the December CPI...

  • First Word
Wed January 11

"Rule of 1st 5 days" implies +26% gain 2023 (7 of 7 times). Dec CPI (1/12) could persuade markets it is less costly for Fed to change narrative than drive US into recession = financial conditions ease = upside stocks.

With the first 6 trading days of 2023 behind us, the S&P 500 is off to a solid start with >2% gains. We have a lot of clients telling us they are being "paid to wait" because they are earning 4% on their cash. This is true, but we think...

  • First Word
Mon January 9

Investors worry Fed playing "whack-a-mole" with equities, but if inflation tanks (with wages slowing), FCIs will ease. First 4 days +1.4% is strong 2023 omen implies +23% gain.

Over the weekend, I had a few conversations with clients and one of them observed that while bond market volatility has dropped (which generally is good for stocks), they viewed being "long equities" as a low Sharpe ratio (high risk but high reward) trade:while stocks could have upside given promising...

  • First Word
Fri January 6

The "maths" show probability of 2023 seeing >20% far higher than expected (53%). VIX key for 2023 returns, not EPS growth and 3 catalysts likely to make "opportunity" less "crisis"

It would not entirely surprise anyone to say that most investors expect equity markets to "churn" in 2023. Basically, most investors believe the "crisis" environment of 2022 is spilling over into 2023. And most just see a litany of headwinds from Fed hikes to economy slowing to EPS contraction to...

  • First Word
Wed January 4

If Fed allows financial conditions (FCI) to ease, stocks could post double-digit gains in 2023...FCI matters more than Fed funds. Industrials, Discretionary, and Technology most levered to easing of FCIs

As markets look ahead to 2023, putting the awful 2022 behind, the plurality of investors are neither bullish nor bearish, but rather are "biding their time" until market visibility improves. That visibility comes in many possible forms from: market capitulation, EPS inflection, Fed pivot, or inflation contracts markedly. [Best Blizzard...

Thu December 29, 2022

SPECIAL: Zooming Out, 2022 was a year of "roundtrips." Fed remains principal "risk" to markets, but we see reaction function changing as inflation continues to fall.

2022 has been a year of "shocks" and "sudden changes."Stubbornly high Inflation was an unexpected “shock” in 2022 that weighed on equity performance, but recent trends show it is falling just as quickly as it rosePersistently elevated geopolitical tensions from conflict between Russia and Ukraine created supply imbalance "price shock"...

  • Intraday First Word
Fri December 23, 2022

Nov Core PCE +0.17% another "tame" inflation report. Dec 2022 PCE tracking to 4.2%, massive schism between Fed "dot plot" forecast of 4.8%.

November PCE inflation report (today) was another tame inflation with Core +0.17% MoM, a second consecutive tame PCE report and adding to the constellation of "soft" CPI and PPI reports.We continue to view 3M annualized CPI or PCE as a better metric for inflation trends3M annualized Core PCE collapsed to...

  • First Word
Fri December 23, 2022

Nov's PCE inflation release will highlight why 2023 is more opportunities, and less crisis. We see downside surprises to PCE inflation = less hawkish path forward for Fed

Equities are struggling in December, capping what has proven to be a horrible year for equities. In our view, US core inflation has apexed (mid-2022) and now running at closer to 2%. But due to lags in how price-level series works (inflation is a price level), inflation will not be...

  • First Word
Wed December 21, 2022

A drop in inflation towards 2% is "the catalyst" for macro and equities as it should drive significant drop in equity and bond volatility. 18 of 19 times, stocks higher

This past week, one of my long-time clients (and friend) acknowledges stocks have fallen so much in 2022 that a turn eventually happens, but asked:"What will get retail investors to buy stocks again?" Most investors will say the catalyst is when "earnings bottom." We disagreeWe believe "the catalyst" is when...