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Things you need to know
- It was a tough week for nearly everything
- Crypto’s came under renewed pressure as the FED considers even more hawkish moves
- Oil – continues to rally even as OPEC promises to increase supply
- Omicron – is not turning out to be the as dangerous as they want you to believe. Cases remain mild….
- Feast of the 7 Fishes – #4 Feta Shrimp
It was a tough week – First we got hit with so many conflicting headlines concerning Omicron…. Was it going to be the death knell that the MSM was making it out to be or not? The Dr. from South Africa telling everyone not to worry, while Anthony Fauci said he ‘he wasn’t sure..’, the Moderna CEO said ‘not so quick’….we might need a whole new vaccine…slow down….let’s think about this’ as his mind was racing over how to profit from another ‘panic’…….As of this morning….the variant has now shown up in more than 40 countries, no one has died and hospitals are not overrun with patients….
…..Stocks got beaten up, High growth names got slaughtered and while the Nasdaq is off 8% in two weeks, individual names are off double and triple that rate putting them all in bear market territory….– DOCU was down a stunning 40% on Friday – .…..the Cathie Woods’s ARKK Innovation ETF (which is all about disruptive tech) is now off 27% for the year while names within her fund are down even more….TDOC -54% ytd, ZM -49% ytd, ROKU -40%, COIN – 32%, TWLO – 29%, SHOP – 27%…it is only TSLA which is still up 47% that is saving her from the being burned at the stake….
Crypto’s, which have been under pressure of late, got smashed – on Friday and then over the weekend…. Bitcoin falling to a weekend low of $42k, Ethereum traded down to $3600, and a slew of others followed suit falling 15%, 25% and even 40% as investors/traders got their clocks cleaned. The thought of higher rates – (a more hawkish FED) makes speculative assets less attractive…. – recall how bitcoin reacted back in 2017/2018 when the FED was raising rates? It collapsed in what is now known as the ‘crypto winter’ and with rates now on the verge of rising again – rumor is that it is going to be a ‘crypto ice age’…. Now I said it ‘was a rumor’….so don’t get your panties in a bunch just yet.
Janet Yellen – Treasury Secretary telling congress and us that a failure to raise the debt ceiling would ‘eviscerate’ the economy – a word that I thought was completely inappropriate – but I’m not the Treasury Secretary….in any event – congress did what everyone knew they would and raised the debt ceiling, so all that talk was nothing but theatrics.
Bonds got bought up – sending yields plunging to 1.38%, as money moved out of stocks and cryptos, OPEC kept its promise to raise output – bringing more supply to the global market – yet oil ROSE to end the week at $66.22 after trading as low as $62.43 mid-week. The takeaway from that is that demand is not getting destroyed, Omicron is not going to be the death knell. OPEC would not have raised output if THEY believed that demand destruction was on the way….and remember – they did qualify their increase by saying that they are watching demand closely – if the data suddenly shifts then they will CUT output to reflect that.
Non-Farm Payroll disappointed on the top line, yet unemployment fell to 4.2% while Average Hourly Earnings missed the estimate by 0.1%…. Factory orders surged by a full 1% and Durable goods orders fell less than the estimate. The volatility index and the FED were all over the place causing investor angst daily.
As of this morning – you have the following FED officials – Bullard, Daly, Bostic, Mester, George, Quarles, and Jay Jay – all towing the latest line…. the taper MUST happen faster – Period. ‘Inflation is much more of a concern – than we all let on, as we tried desperately to control the narrative and prevent a market selloff…’ How’d that work out? Now it is clear that they misjudged it and if they don’t act fast – then we’re in trouble…..In fact – they are so worried now – that they sent Jimmy Bullard – St Louis Fed President out to float the idea that the taper must happen simultaneously with interest rate hikes….which if you remember was something that Jay specifically said would not be happening…..So, so much for that narrative…And don’t think that was not orchestrated…..it absolutely was….That’s how it all works….
Stocks took it on the chin again…. the Dow falling 60 pts, the S&P 500 down 40, the Nasdaq gave back 300 pts, the Russell lost 47 all while the transports gained 18…. (a complete disconnect…)
This morning we are waking up to a weaker Asia – Tech under the gun, Chinese property giant Evergrande will be removed from the Chinese Enterprise Index just as it is making headlines again about potentially failing on the next bond payment….3 hours ago – the gov’t cut the reserve requirement that Chinese banks need to have on hand to help slow and selloff by offering some new stimulus. The weekend weakness in crypto’s not helping the mood. Alibaba drops 5.6% after news of a management change – that now brings that stocks performance to -56% ytd. DIDI – also announced that it is in fact moving its listing from the NYSE to Hong Kong on pressure by Xi Xi…which begs the question – Why would you have anything China in your portfolio? Why would you allow Xi Xi to determine your investment returns? I say – there are so many other places to put your hard-earned investment dollars for international exposure. Hong Kong down 1.8%, Japan – 0.4%, China – 0.2% and the ASX +0.05%.
European markets have begun the week in the plus column…. German industrial production plunged by 6.9% m/m in October vs. the expected decline of 0.5%. The Eurozone Sentix index is also due out this morning….and that offers a view of the 6-month economic outlook by investors and analysts for the whole of the EZ. A positive number is optimistic while a negative number would be considered ‘not optimistic’…. (DUH!) Omicron is simmering on the back burner and is not sending markets into a tailspin at all. As of 6:15 am – markets across the region are up between 0.5% – 0.9%.
Dow Futures are UP at +170 pts…. but that is down from +230 pts at 5 am…. S&P’s had gone negative but are now up 9 pts, the Nasdaq has been lowering all night and is off 115 pts while the Russell is up 15 pts. Over the weekend we learned more about what is on the FED’s mind…. How fast to taper, how fast to initiate rate hikes, what the pace should be vs. what the market expects. FED Fund markets are now hinting at a May rate hike with two more penciled in for the summer of ’22 and then the fall of ‘22 – which would mean that the taper is most likely completed by March or the latest April. But beware – none of this is carved in stone at all….it remains very fluid.
Omicron is now in more than 40 countries worldwide and in at least 12 states in the US. – MA, NY, CA, MI, MO, MD, GA, UT, CO, HI. NE & PA. And while cases are increasing – there have not been any allocated deaths yet, nor are hospitals overrun with cases…New therapeutics and the vaccines are certainly helping this latest variant.
10 Yr. Treasuries are trading down slightly sending yields up, Oil is trading up 2.8% or $1.90 at $68.12/barrel. The VIX which spiked higher last week – as high as 35 is a bit weaker this morning…. And expect more cases of Omicron to be reported. Ok, great…. We’ve got 3 weeks until year end…. lots of uncertainty about tax policy, infrastructure spending, FED moves, yearend planning, etc. Recall that many are calling for 10 yr. yields to approach 1.8% + or – and my sense is that right now – that will not happen…. We might tease 1.6% again but 1.8% seems like a big move in 3 weeks. and if that does happen it will certainly cause stocks (and crypto’s) to pull back fast….and you can be sure that the administration and the Fed do not want that to happen – or maybe they do?
In the end – the turbulence that I and many others have been talking about is also here to stay for a while and in my opinion will get worse in January….…. we are in the final stretch of the year….I think the market churns…..it’s hard for me to think we could test new highs in the next 3 weeks when we have all of this drama and uncertainty…because in the end – the market does not like uncertainty….it can deal with bad news, it can deal with the facts, what causes the angst is the uncertainty and speculation about the what ‘if’s’ Which is exactly why we have these daily big swings….it is all about the ‘if’s’.
The S&P closed at 4538 taking it once again down thru the trendline – look for support at 4490 …. The other indexes which have all broken down as well…. are trying to find stability as well. Will they be able to hold on or will investors sell into any strong rally that results? We are about to find out…. This is not the time to fall asleep.
I am still in the camp that this new variant will NOT prove to be the disaster that they want you to think it is…. nor do I think the next variant will be either…. I am operating under the assumption that this too shall pass….and now that the FED has shown its true colors – you need to be ready for more volatility in the weeks ahead…. I think it comes more in January than December…. but it’s coming…
Remember you can text the word INVEST to 21000 on your cell phone to get my digital business card. Feel free to download it and send me off an email or text. Happy to engage and talk markets, planning, thoughts, concerns, and ideas.
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Take Good Care
Chief Market Strategist, Consultant
kpolcari@slatestone.com
Feast of the 7 Fishes – #4 Feta Shrimp
Feta Shrimp – This one is easy and can be served several ways. Either in a large bowl with toasted garlic bread or over a pasta – maybe like an Orecchiette or over white rice….
For this you will need: 2 lbs. of large cleaned and deveined shrimp, sliced garlic (a lot), thin sliced plum tomatoes, feta cheese, butter, s&p, olive oil & Madeira wine. * You can prepare all of this ahead of time and place in bowls to have ready for you when you are ready to cook. The thing about this dish is – you must make it and serve it right away….
Begin by heating up ½ stick of butter and some olive oil on med high heat. Add a handful of sliced garlic and sauté for 4 mins or so…do not burn. Next add in enough shrimp so that you cover the bottom of the pan – do not pile them on top of each other…. When they turn pink – flip them over.
Now add enough Madeira wine to “bathe” the shrimp – (do not drown or cover them in wine) – Turn heat to hi…. season with s&p, place sliced plum tomatoes all over and then top with crumbled feta cheese. Cover and allow the steam to soften the tomatoes and soften the cheese. No more than 3 mins. Remove and place in a large serving bowl. Repeat process until you have cooked all the shrimp. When serving – make sure that you have enough garlic bread for your guests.
*If you are putting over pasta – then boil the pasta – strain and mix adding extra feta cheese to the hot pasta to help make it creamy and delicious.
Buon Appetito.