Perspectives

It’s always tempting to prognosticate how a headline event – geopolitical conflict, Fed action, etc. – may change the complexion of the market, but it’s been our experience that exogenous inputs do more to reinforce trends already in place rather than change the game. We’re not sure anyone has a real edge on Russia / Ukraine, and if they did, it doesn’t mean they’ll get the market’s reaction function correct as well. Prior to the acceleration of this conflict over recent weeks, t… View More

After posting back-to-back weekly gains following the big January sell-off, equities were lower last week (S&P -1.8%). Value and small-cap beat growth and large-cap. Oil was higher for an eighth-straight week. The big story was the January CPI inflation surprise and hawkish Fed commentary. Best sectors were energy (+2.1%) and materials (+1.1%); worst sectors were communication services (-3.9%) and technology (-2.9%). 4Q Earnings Now 70% Reported The fundamental improvement for the aggreg… View More

There were plenty of concerns to go around as we finished out the week including: The imminent risk of war between Russia and Ukraine continues to build. The NY Times on February 11th reported US officials have picked up intelligence suggesting Russia may invade Ukraine as early as Wednesday. Further chip shortages may result from a conflict with Russia. The White House warned the US Chip Industry on February 11th that Russia may retaliate against US sanctions by blocking access to key materia… View More

Inflation is starting to be noticed by everyone everywhere. We will not discuss the price of fuel which we expect will be north of $5.00 a gallon in California in the next few weeks. However, we do want to share a recent local “dining” experience. We were out to lunch the other day at a local Mexican restaurant that we have gone to for more than two decades, and we noticed the temporary copied paper menus on the table had replaced the regular menus. I always order the same thing at this plac… View More

U.S. equities finished last week mostly higher (S&P 500 +0.8%), coming off intraweek lows and rallying strongly on Friday. The S&P 500 moved into double-digit percentage loss territory several times before the end of the week rally. The market reacted negatively to the FOMC meeting, judging that the recent hawkish Fed repricing has more room to run. The Q4 earnings season also continued to prove mediocre, with supply disruptions and cost pressures showing up in too many reports. Best sec… View More

As we have mentioned over the last few months, we expect market volatility to increase in 2022. There are a number of reasons for our concern such as the long running bull market, real Inflation for the first time in more than 20 years and rising interest rates. Maybe our largest concern was the midterm elections while our other concerns are playing out. Midterm elections tend to have larger equity market corrections compared to non-midterm election years with an average intra-year decline of 19… View More

The first quarter of 2022 is slowing. There’s a clear shock to demand (eg, closures for schools, flights, cruises, etc). U.S. initial jobless claims rose to 286,000 in the Jan 15th week, with existing home sales dipping -4.6% m/m in Dec. However, not all the U.S. data were negative, with the Philly Fed index rising to 23.2 in Jan (offsetting the plunge in the NY Fed manufacturing index earlier in the week). Housing starts rose month over month in Dec and the NAHB housing market index remained … View More

Increased Market volatility absolutely has to do with inflation and all eyes are looking on how the Fed can catch up from recent mistakes. It has been claimed that the first casualty in any war is the truth. In the fullness of time, historians of future generations will be charged with determining whether this maxim was accurate when it came to the all-out war waged by policymakers against COVID-19. Certainly, in addition to the tragic loss of life due to the virus, there have been other public … View More

4Q Earnings Season Could Be Choppy If Friday was any indication of how the earnings season will pan out, it could be a choppy one for investors. Earnings growth is largely expected to be robust along with sales growth. However, the headline figures are deceiving because energy is expected to recover significantly, propping up the S&P figure. Ex. Energy earnings growth is expected to be closer to 15% - still a respectable number. NTM EPS Still Marching Higher From a macro perspective, we w… View More

In our Monday reports, we always strive to first highlight what is most important for clients, but frankly, we debated what exactly that should be this morning. There was a long list of contenders… the breakout in global yields, the subtle weakness in USD, the momentum surge from the Banks, the strength out of the Energy stocks, the outperformance of Staples vs. Discretionary, the weakness in Software, the persistent selling of the market’s most speculative corners, or the breakdown in small… View More