The Morning Call---Earnings expectations keep rising

 

The Morning Call

 

4/24/24

 

I am taking a long weekend. Back on Monday.

 

The Market

         

    Technical

 

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/bonds-stocks-bid-bad-news-buyers-trump-cta-sellers

 

I like Lance Roberts and agree with most of his analysis. However, this piece that addresses the viability of gold in the current environment is a bit convoluted. Specifically, if rising debt slows economic activity/earnings growth, why would the simultaneous rise in liquidity favor stocks (slower earnings growth) versus commodities (gold)? I include it for its different perspective.

https://www.advisorperspectives.com/commentaries/2024/04/23/reflation-trade-new-bullish-narrative-lance-roberts

 

            The strong dollar may not last.

            https://www.bloomberg.com/opinion/articles/2024-04-23/this-strong-dollar-is-nothing-to-fear?srnd=homepage-americas&sref=loFkkPMQ

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly mortgage applications fell 2.7% while purchase applications were down 1.0%.

 

Month to date retail chain store sales were stronger than in the prior week.

 

                          March new home sales rose 8.8% versus estimates of +2.7%.

                          https://www.advisorperspectives.com/dshort/updates/2024/04/23/new-home-sales-jump-march-2024

 

The April flash manufacturing PMI was 49.9 versus predictions of 52.0; the flash services PMI was 50.9 versus 52.0; the flash composite PMI was 50.9 versus 52.2.

https://www.zerohedge.com/markets/us-pmis-scream-stagflation-manufacturing-contracts-prices-rise-heaviest-job-cuts-gfc

 

The April Richmond Fed manufacturing index was -7, in line.

                          https://www.advisorperspectives.com/dshort/updates/2024/04/23/richmond-fed-manufacturing-activity-remained-slow-april-2024

 

 

March durable goods orders rose 2.6% versus forecasts of +2.5%; ex transportation, they were up 0.2% versus +0.3%---but with another of those downward revisions of prior reports.

https://www.zerohedge.com/economics/durables-goods-orders-suffers-biggest-yoy-decline-covid-lockdowns

 

 

                        International

 

The April German business climate index was 89.4 versus consensus of 88.9; the April current conditions index was 88.9 versus 88.7.

 

The April UK business optimism index was 9 versus expectations of 2; the April industrial trends orders index was -23 versus -1.

 

                        Other

 

                          It’s the economy, stupid.

                          https://www.aei.org/economics/its-the-economy-stupid/

 

            The Fed

 

              LaGarde’s comments notwithstanding, the ECB may be somewhat Fed dependent.

              https://www.wsj.com/economy/global/ecb-will-consider-feds-progress-when-deciding-on-rate-cuts-de-guindos-says-35b6c9b6?mod=economy_lead_pos3

 

Diverging growth between the US and ECB will likely lead to diverging monetary policies.

 https://www.wsj.com/economy/global/eurozone-rebound-lags-u-s-growth-as-divergence-takes-hold-537b0ac6?mod=economy_lead_pos1

 

 

            Recession

 

              The latest Q1 nowcast.

              https://www.capitalspectator.com/us-q1-gdp-report-looks-set-for-slowdown-in-thursdays-release/

 

            War in the Middle East

 

              Oil may be shedding its risk premium too fast.

              https://www.bloomberg.com/news/newsletters/2024-04-23/oil-is-shedding-its-mideast-fear-premium-too-fast?srnd=homepage-americas&sref=loFkkPMQ

 

    Bottom line.

 

            Strategic asset allocation.

            https://alhambrapartners.com/2024/04/21/weekly-market-pulse-situation-normal/?src=news

 

            Earnings expectations keep rising.

            https://www.apolloacademy.com/strong-sp-500-earnings-expectations/

 

            Some analysts believe that the sell off has further to go.

https://finance.yahoo.com/news/jpmorgan-warns-stock-market-sell-off-has-further-to-go-080049554.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuY2FwaXRhbHNwZWN0YXRvci5jb20v&guce_referrer_sig=AQAAAC1V8-m267svNrXbZ6ee2E6mQkGyrA4Q7dojYgQqnrqHO9YDLkSWNf-ah_BeStyoYy33b2EFYs6k_makDGOBihGtkISncoGbfaW7bMKDTOgbu1ocoWa-qnxp4sxIwERT1BYdrk6psN6yhaDfNunalirEL1l7JTt1qYhqj7QmkA4v

 

 

    News on Stocks in Our Portfolios

 

General Dynamics press release (NYSE:GD): Q1 GAAP EPS of $2.88 misses by $0.05.

Revenue of $10.7B (+8.6% Y/Y) beats by $400M.

 

Canadian National Railway press release (NYSE:CNI): Q1 GAAP EPS of C$1.72.

Revenue of C$4.25B (-1.4% Y/Y).

 

Canadian National Railway (NYSE:CNI) declares CAD 0.845/share quarterly dividend, in line with previous.

 

 

What I am reading today

 

           

 

 

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The Morning Call---The inflation math for 2024

 

The Morning Call

 

4/23/24

 

The Market

         

    Technical

 

            Monday in the charts.

            https://www.zerohedge.com/markets/gold-slumps-stocks-dumpnpumped-biggest-short-squeeze-month-algos-front-run-buybacks

 

            The bounce.

            https://www.zerohedge.com/the-market-ear/bounce-0

 

            Election year seasonality.

            https://jeffhirsch.tumblr.com/post/748119552687243264/big-election-year-q1s-dip-april-may-before-gains

 

            The strong dollar delivers wake up call for markets.

https://www.bloomberg.com/news/articles/2024-04-22/dollar-s-extended-supremacy-is-a-stark-wake-up-call-for-markets?srnd=homepage-americas&sref=loFkkPMQ

 

            Will commodities continue to outperform?

            https://www.capitalspectator.com/will-commodities-continue-to-outperform-in-2024/

 

            China’s consumers and central bank are snapping up gold.

            https://www.businessinsider.com/gold-price-china-consumers-central-bank-pboc-economy-concerns-dedollarization-2024-4

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          March building permits fell 3.7% versus forecasts of -4.3%.

 

                        International

 

The April EU flash consumer confidence index was -14.7 versus consensus of -14.0.

 

The April Japanese flash manufacturing PMI was 53.5 versus projections of 53.2; the flash services PMI was 54.6 versus 54.0; the flash composite PMI was 52.6 versus 52.0; the April German flash manufacturing PMI was 42.2 versus 42.8; the flash services PMI was 50.5 versus 48.6; the flash composite PMI was 53.3 versus 50.6; the April EU flash manufacturing PMI was 45.2 versus 46.5; the flash services PMI was 52.9 versus 51.8; the flash composite PMI was 55.4 versus 50.8; the April UK flash manufacturing PMI was 48.7 versus 50.3; the flash services PMI was 54.9 versus 53.0; the flash composite PMI was 54.0 versus 53.0.

 

                        Other

 

                          March median household income.

                          https://econbrowser.com/archives/2024/04/real-median-household-income-for-march

 

            The Fed

 

              The Bank of China leaves rates unchanged.

              https://www.wsj.com/economy/central-banking/chinas-benchmark-lending-rates-kept-unchanged-0547a10b?mod=economy_lead_pos2

 

            Fiscal Policy

 

              The student loan forgiveness scam.

              https://www.wsj.com/articles/biden-save-student-loan-forgiveness-plan-miguel-cardona-states-lawsuits-fb2a17bc?mod=hp_opin_pos_5#cxrecs_s

 

              The bad faith Olympics.

              https://www.zerohedge.com/political/bad-faith-olympics

 

            Inflation

 

              The inflation math for the rest of 2024.

              https://www.apolloacademy.com/inflation-scenarios/

 

              Government could stop inflation if it wanted.

              https://www.zerohedge.com/political/governments-could-stop-inflation-if-they-wanted-they-will-not

 

    News on Stocks in Our Portfolios

 

 

What I am reading today

 

            Tuesday morning humor.

            https://babylonbee.com/news/10-other-things-mike-johnson-wants-to-fund-before-the-border

 

                        The key to a successful life.

            https://traderfeed.blogspot.com/2024/04/the-key-to-successful-life.html

 

            The US strategy for great power competition.

            https://www.nakedcapitalism.com/2024/04/us-strategy-for-great-power-competition-more-graft-and-hope-for-wonder-weapons.html

 

                        How to die in good health.

            https://www.newyorker.com/magazine/2024/04/22/how-to-die-in-good-health

 

 

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Monday Morning Chartology

 

The Morning Call

 

4/22/24

 

The Market

         

    Technical

 

It was another punk week for the S&P.  It reverted its 50 DMA from support to resistance and appears to be about to challenge its 100 DMA (now ~4931). Still not enough to prompt a great deal of worry, but….we need to be aware of potential downside (i.e., support levels). Those exist at ~4674 (the 200 DMA) and ~4436 (the lower boundary of its short term uptrend). The good news is that the S&P has now filled that gap up open and remains above multiple support levels. The bad news is that those multiple support levels exist at much lower levels. It is too soon to be committing cash.

 

            Tech titans: a bounce and then a move down?

            https://www.zerohedge.com/the-market-ear/tech-titans-bounce-now-and-then-next-move-down

 

 

 

The long bond’s rough ride continued, putting in another gap down open on Monday (there are now three of them). It now (1) is below all DMAs (2) has  made four lower highs and will likely make a fifth barring a substantial rally and (3) is in downtrends across all time frames. Unless you like trying to guess bottoms, this is no time to buy bonds.

 

 

 

GLD maintained its upward momentum though at a vastly reduced pace. That makes sense given fears of inflation (of which I continue to become more convinced) and geopolitical turmoil.

 

I continue to hold my GDX (gold miners ETF).

 

 

 

The dollar had a flattish week, though it did confirm its successful challenge of its 200 DMA (now support).  I remain somewhat puzzled by the dollar’s strong performance viz a viz the pin action in the long bonds and gold. On the other hand, those two huge gap up opens suggest future weakness which would bring it more in line with the rest of the indicators.

 

 

 

 

 

            Friday in the charts.

            https://www.zerohedge.com/markets/tech-wrecks-fedspeak-fks-fomo-followers-gold-hits-new-record-high

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        Week in review

 

Last week’s stats were slightly weighted to the negative side with one primary indicator positive, one neutral and three negative. Despite the headline narrative that the economy is gaining strength, the numbers just aren’t there. On the other hand, there is nothing in the overall data to indicate a recession.

 

I noted last week that I was starting to believe that we may be returning to the pre-covid ‘muddle through’ economy. The more I think about it, the more sense that makes, especially given that the main tenant that of forecast (i.e., too much government debt usurping private capital/resources) is even worse today. As a result, I am a short hair away from revising my outlook from recession to ‘muddle through.’

 

The inflation data continues to make for unhappy investor reading. The result being that I changed my forecast to one in which inflation is and will likely remain a problem. And that fits well with the above notion of excessive government spending/debt. Adding that to a historically dovish Fed (its current hawkish noises, notwithstanding) and the recent performance of commodities (gold, oil) and bitcoin leads me to the conclusion that inflation may be as good (low) as it is going to get.

 

Those hawkish Fed noises.

https://www.bloomberg.com/news/articles/2024-04-19/fed-s-powell-rethinks-interest-rate-cuts-for-2024-to-combat-inflation?srnd=homepage-americas&sref=loFkkPMQ

 

But my favorite optimist still believes inflation is declining.

https://scottgrannis.blogspot.com/2024/04/belated-march-cpi-analysis.html

 

Bottom line:

 

(1)   as long as the government pursues its current spend, spend policy, I don’t see us making any further progress in lowering the inflation rate. Indeed, the Fed’s hawkish rhetoric aside, I don’t think it has any choice but to continue monetizing the government IOUs.

                                                        

(2)   the question of recession [what kind of landing] remains a bit murky, but I think that the economy has shown enough strength to warrant modifying my recession forecast slightly to a ‘muddle through’ scenario. I am not quite there; but another week or so of inconclusive stats and I will be.

                                

                                               

                        US

 

The Chicago national activity index came in at .15 versus estimates of .09.

 

                        International

 

                        Other

           

            Fiscal Policy

 

              Five fiscal truths (must read).

              https://www.cato.org/blog/five-fiscal-truths

 

              Ruling class suckers.

              https://www.zerohedge.com/geopolitical/ukraine-gets-their-billions-despite-cia-director-reportedly-warnings-zelenksy-stop

 

              Debt to GDP ratios around the world.

              https://www.zerohedge.com/economics/how-debt-gdp-ratios-have-changed-around-world-2000

 

            Recession

 

             Update on big four recession indicators.

              https://www.advisorperspectives.com/dshort/updates/2024/04/19/recession-indicators-industrial-production-march-2024

 

              Commercial real estate foreclosures soar.

              https://www.zerohedge.com/markets/commercial-real-estate-foreclosures-soar-levels-not-seen-nearly-decade

 

            War in the Middle East

 

While most pundits are rejoicing over Israel’s rather contained response to Iran’s missile attacks on the Jewish homeland in the hopes that a serious war has been avoided, Mohamed El Erian is not so sure.

              https://www.ft.com/content/53f64b6b-3151-46b3-ad83-3a4732c35d41

 

 

     Bottom line.

           

            The latest from BofA. (must read)

            https://www.zerohedge.com/markets/hartnetts-apocalyptic-vision-next-central-bank-bailout-will-be-public-sector

 

            How well does a ‘buy and hold’ strategy work?

            https://www.hunterlewisllc.com/insights/how-bad-could-it-get

 

                        The indispensability of risk.

            https://www.advisorperspectives.com/commentaries/2024/04/19/indispensability-of-risk-howard-marks

 

    News on Stocks in Our Portfolios

 

 

What I am reading today

 

 

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.