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Things you need to know –

  • It’s a big week in DC…Will the Dems force $3.5 trillion down our throats?
  • Evergrande and Crypto’s are not creating market angst at all….
  • German elections show support for center left vs. center right
  • 10 Yr. Treasuries heading towards 1.6% – short term cap for markets
  • Try the Tuscan Soup

Stocks muddled their way through the day on Friday as investors tried to figure out what, if any, blowback there might be because of the China Evergrande debacle as well as the crypto currency issue that China has now created.  It was essentially a sleepy session that ended a very after a very volatile week that began with stocks under tremendous pressure – due to that idea that Evergrande might be another ‘Lehman Moment’ – leading many to think this was the beginning of a bigger move lower.

Then on Wednesday of last week – Fed Chair Jay Powell took to the podium to tell us that it’s all ‘OK’ and that the FED would move on taper – but not on rates – sometime soon…. soon being the operative word – because everyone has their own definition of soon.  Is it soon like next month or is it soon like next year?  Because in the big scheme of things – soon – doesn’t really mean anything when it has no firm parameters built around it.  It is completely open to interpretation and the talking heads will try to rationalize it every which way to Sunday.    By the end of the day – the Dow added 33 pts, the S&P up 6, the Transports up 109 while the Nasdaq and the Russell fell by 4 and 11 pts respectively.

As noted the China issues – did little to create more long term fear…..Yes, the Evergrande related risk worried global investors on Monday but failed to ignite any real pullback in the global markets for the rest of the week and then on Friday – China does it again – suddenly pulling the rug out from underneath the crypto/crypto currency space – announcing that ‘all cryptocurrency related activities are illegal’……and while BOOM was the first reaction causing anything in the crypto space to get hit – by the end of the day it was nothing but a burp…While they took COIN down nearly 10% in the minutes after that announcement – it did not end up being the disaster it first appeared to be.  COIN ending the day down 2.4% while Bitcoin and Ethereum traded lower by 5% & 8% respectively…. In the end – I think China’s push backwards will end up being a big plus for the space.

The more China pushes back, the more interest it will get from other parts of the world – Mining of bitcoins – which was big Chinese thing – will move offshore to other locales – because FYI – This isn’t going away anytime soon…. And in fact – Bitcoin which had traded down to just below $40k on Friday is now trading higher than it was prior to the announcement and is at $44k this morning.  Ethereum – traded down to $2800 on Friday and is now back above $3100 this morning. And no one is even talking about ANY China issues this morning…. – think Evergrande, Crypto and Covid.

Over the weekend – the Germans took to the voting booth and Olaf Scholz is the new name to watch – his center left socialist party has defeated Angela Merkel’s conservative party in what was an extremely tight election – and that underscores the uncertainty facing Germany.  And this has already set up months of complex negotiations that will determine the next German Chancellor when Angie retires later this year.  In the end – Germans are happy that this election didn’t result in a hard left coalition.  From an investing point of view – expect lots of focus on, infrastructure, climate, and green energy.  The new German gov’t will have to focus on many of the same issues we are seeing around the world.  Aging infrastructure, digital technologies and weaning itself off fossil fuels without destabilizing the European economy.  More to come….

European markets are all up across the board – not big, but they are all green. The German elections doing little upset the mood.  ECB President – Christine Lagarde is due to speak in front of the European Parliament – although nothing earth shattering is expected to come of it. There are no eco reports due out today and as noted – no one is talking about China.

US futures are mostly up…. Dow futures up 134 pts, S&P’s up 9 pts, and the Russell is up 10 – all while the Nasdaq is off by 25 pts as the tug of war continues.  Now look – we are still in a seasonally volatile time of year and the end of September into mid- October is the worst part of that.  Remember – this does not mean you abandon stocks at all…. You may consider tweaking some of the outperformers while adding new money to more defensive sectors – that may not be the high-growth sexy names, but they will offer some stability and growth in times of stress.  I like value (Industrials, Financials, Consumer Staples, and Energy) and big dividend paying stocks as we move into the new year.  So far this year Industrials are up 14% ytd, Financials up 30% ytd, Energy is up 34% ytd while Consumer Staples are only up 5% ytd.

The 10 yr. treasury yield ended the day yielding 1.488% and has now broken up and through all resistance levels.  A look at the chart suggests that we are headed for 1.6% in short order and that will put a cap on equities at least in the short term until we get ‘more clarity’ from the Fed.  Recall that many analysts on the street are calling for 10 yr. yields to be between 1.8% – 2% by year end.  Gold is trading at $1,747 this morning – which is down $4, which again makes sense as angst and fear subside.  The VIX – is at $18.12.

Oil rose 0.9% on Friday and is up another 1.23% today trading at $75/barrel as supply concerns continue to tell that story.  I guess Joey will need to ask OPEC to raise production limits (again).   Recall that OPEC + also struggling to raise output as maintenance delays hampered their efforts to raise output.  In the end – demand is alive and well and $80 oil is now within sight.

Eco data today includes Durable Goods – exp of 0.6%, Capital Goods Orders of +0.5% and Capital Goods Shipped of +0.5% – while the Dallas Fed Survey is at 11.

Bitcoin is up – trading at $44,000 and Ethereum is down 9% at $3,100 –

The S&P ended the day at 4455 – and with futures higher this morning – we can expect it to churn right here as we watch the drama unfold in DC.  This is a big week for Pelosi and Schumer…. will they get the votes they need for the $3.5 trillion Biden economic plan?  The smart money says ‘No Way’……and the headlines say it all……

‘Pelosi’s Democrats Head for a Showdown This Week….’

The article points out the huge bill is in danger of failing…. the far-left progressive wing of the party threatening to kill it.  – the Vote is scheduled for Thursday.

In addition, we have the debt ceiling issue in front of us and while it is an issue – it does not usually stress markets that much – it does provide fodder for the late-night shows – but it is more about the drama than not- because in the end – they will raise it – and the market knows that.  Period.

The S&P remains well within the trading band of 4380/4675….a test once again of trendline support is not out of the question in the weeks ahead….and a failure to hold onto that support level could see the markets test lower – and the chart suggests that could be at the 4250 level – which would represent a 3% move lower from here….the upside is limited to what I think is 4550 – the most recent highs of early September. Remember – now – I think the path of least resistance is lower.

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Take Good Care

Chief Market Strategist, Consultant

Tuscan Soup

So delicious and great for the cool fall days….

For this you need – 1 lb. sweet sausage, 4 slices of thick cut bacon, 1 large Vidalia onion, 2 cloves of chopped garlic, about 8 cups of chicken broth, red potatoes – thinly sliced, 1 cup of lite cream and a bag of fresh spinach.  (You can substitute Kale if you like).

Begin by browning the sausage meat in a heavy pot.  Season with s&p – once it’s all browned – remove and set aside.

Next in the same pot – crisp up the bacon.  When all crisped remove and set aside.  If there is a lot of bacon fat – remove most of it leaving only about 2 tbsp. in the pot.

Next add the chopped onion and chopped garlic.  Stir until soft – maybe 6 – 8 mins.

Now – add the chicken broth to the onions and garlic – add back the bacon – bring to a boil – next add the sliced potatoes and cook until fork tender – maybe like 15- or 20-mins max.   Reduce the heat to med low and add back the sausage and pour in the heavy cream – stir to combine and heat through.  Add the spinach right before you’re ready to serve – this way it doesn’t completely wilt and stays bright green.

Serve immediately.  So good.

Buon Appetito.