From Barron’s, March 25, 2024 (Part 1, Market Week+)
Mar 23, 2024 10:20:02 GMT
chang, fishingrod, and 7 more like this
Post by yogibearbull on Mar 23, 2024 10:20:02 GMT
From Barron’s, March 25, 2024 (Part 1, Market Week+)
Pg 28, TRADER. This mega-cap BULL market will continue. The Fed didn’t do anything to derail it (posture is bullish hold). The AI hype lives on. The semi-ETF SOXX is strong. Investors are buying dips, and there is high FOMO. Don’t fight the bulls although correction is possible. AAPL has been a drag, but it too may catch bids here.
According to BoA survey of fund managers, some money is flowing from the US SP500 (fwd P/E 20.7) to Stoxx Europe 600 (fwd P/E 13.8). The 10-yr yields are US 4.19%, UK 4.1%, Germany 2%.
Home furnishing retailer RH may get a boost from its earnings report on 3/26/24. In 2023, it cleared inventory by offering discounts but that hurt its margins. It’s also growing overseas.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
FOMC 5/1/24+ hold (cycle peak 5.25-5.50%)
FOMC 6/12/24+ cut
FOMC 7/31/24+ hold
FOMC 9/18/24+ cut
FOMC 11/7/24+ cut
(A rare alignment with the FOMC) (Probabilities for some rate-ranges aren’t high, so there can be some unexpected moves.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +1.97%, SP500 +2.29%, Nasdaq Comp +2.85%, R2000 +1.60%. DJ Transports +3.31%; DJ Utilities +0.95%. (Rotating spot Europe IEUR +0.24%) US$ index (spot) +0.97% (remains too strong over 100), oil/WTI futures -0.51%, gold futures UNCH.
YTD (index changes only), DJIA +4.74%, SP500 +9.74%, Nasdaq Comp +9.44%. (Rotating spot Europe IEUR +4.56%)
SENTIMENTS
(ALL sentiments remain good and steady, but they peaked in mid-December)
NYSE cumulative (5-day) A/D LINE rose; ratio of winners:losers 3:1
FUND INFLOWS +/OUTFLOWS-: Stocks +|+, taxable bonds +|-, munis +|0, money-market funds +|-. (NEW FORMAT: 4wMA|weekly change)
(All flow levels remain positive)
AAII Bull-Bear Spread +16.0% (above average). (Thursday-Wednesday)
(Sentiment Scale: v low << avg - 1*SD; low < avg - 1*SD; below avg, avg, above avg for in-between; high > avg + 1*SD, v high >> avg + 1*SD)
ybbpersonalfinance.proboards.com/thread/141/aaii-sentiment-survey-weekly?page=12&scrollTo=1285
%Above 50-dMA for NYSE-listed stocks 70.06% (just overbought); (StockCharts $NYA50R for NYSE; $SPXA50R for the SP500 in the bottom panel),
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 74.4% (overbought); a proprietary index for %Above 75-dMA for selected 1,800 stocks that is published midweek but is updated by Barron’s only on late-Fridays (so, it typically LAGS). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
(Common Scale for %Above: oversold < 30-; 30 < negative < 50-; 50 < positive < 70-; overbought > 70; note that Delta MSI itself uses all in/out using 50% neutral value, but the same graduated scale is used here for both sources of %Above.)
Pg 31, INTERNATIONAL TRADER. ARGENTINE bonds have rallied from below 40c (on par) to 50c since President MILEI took office on 12/10/23. This despite President’s major proposals rejected by the parliament; he has moved on to Plan B. But he has delivered on some of his promises by presidential actions/decrees. Inflation has been slashed; primary budget (without debt service) has been balanced.
Pg 32, OPTIONS. Short-term options (=< 5 days), especially the ODTE, are the newest fad or mania. These are only for speculation, while the longer-dated options are for both speculation and hedging. There are now more shares controlled by options than the shares themselves and that may cause market instabilities. Some high-priced stocks are also favorites of options traders.
SP500 VIX 13.06 (low), Nasdaq 100 VXN 17.04, options SKEW 154.84 (high), bond MOVE 91.04 (Yahoo Finance data).
(Low VIX, high SKEW combo is a sign of nervous bulls)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 45: An up week in EUROPE (Netherlands +3.62%, Denmark -0.49%) and a good week in ASIA (Japan +5.42%, HK -3.30%) (Japan started tightening; HK & China sat out the global rally).
TREASURY* 3-mo yield 5.46%, 1-yr 4.98%, 2-yr 4.59%, 5-yr 4.20%, 10-yr 4.22%, 30-yr 4.39%;
REAL yields 5-yr 1.79%, 10-yr 1.87%, 30-yr 2.10%;
FRNs Index** 5.315% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose ^DXY 104.43, +1% (pg 50). GOLD rose to 2,172, +0.4% (Handy & Harman spot, Thursday; pg 52); the gold-miners fell. (^XAU was at 119.21, -1.07% for the week)
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
US SAVINGS I-Bonds**, NEW rate from November 1, 2023, is 5.27%; the fixed rate is +1.30%, the semiannual inflation is +1.97%.
(NOTE – The Social Security COLA for 2024, based on the Q3 average of CPI-W, is +3.2%)
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS)
www.treasurydirect.gov/auctions/announcements-data-results/frn-daily/
www.treasurydirect.gov/marketable-securities/
***For local rates www.depositaccounts.com/banks/rates-map/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 16, COVER STORY, “MEDICARE ADVANTAGE is Under Fire. What it Means for your Healthcare”. There are TV ads aggressively pitching for Medicare Advantage (MA; also called Part C) – some claims are genuine, but others may be overhyped. Insurance brokers get higher commissions for signing up people for the MA vs the Medigap. Participation in MA plans is rising steadily at +7% and is now at 50%+ of all Medicare-eligible people. Their low costs, all-in-one aspect (A + B + D + extras), and some extra coverage (eye, dental, gym, etc) are appealing. But remember that once in MA, it may be hard to get back into original Medicare (especially, the Medigap). It isn’t a 2-way street, but rather a 1-way street, and the data show that only about 2% of people on MA can get back into original Medicare (a sticky point is medical underwriting required for Medicap with the initial signup being the only exception). Unfortunately, some are just skipping Medigap, but that is costly and risky as Medicare covers only 80%. Some MA plans are under financial stress and may try to cut corners by playing games with preapprovals, denials, step-treatments, etc; this may be more for MA-HMOs, less for MA-PPOs. The Government is also investigating some MA plans for abuses such as upcoding, overbilling, etc. The Government’s costs for MA are also rising. Some providers refuse to accept Medicare and/or MA due to lower reimbursements, paperwork requirements, etc.
Pg 7, UP AND DOWN WALL STREET. This global EVERYTHING-rally powers on. The DJIA 40,000 isn’t far away (time to reprint all those old out-of-print books?). Most global central banks are in easing or hold mode, except for the BOJ and SNB. The fed fund futures market finally seem to be in line with the FOMC projections (3 cuts of 25 bps in 2024). The US GDP growth is +2.1% est, core PCE +2.6% est, unemployment rate 4.0% est. POWELL reiterated +2% average inflation target “over time” and hinted higher rates for longer. The Fed rate cut may be in June or later. For 12 months, stocks are up +33%, housing prices +6%, household wealth +9%, but let’s go along with the Fed if it sees the financial conditions as tight (some areas of economy may indeed be facing tight conditions).
Why is the fear gauge VIX so low? Some say that the options-based ETFs (giant JEPI & others) may be one of the reasons. Massive call-writing (-selling) by these ETFs and related dealer-hedging has depressed VIX. Skeptics say that the options market is too big for such distortions, and that volatilities are down across the board. They point to factors such as the Fed (lower rates eventually), declining inflation, economic (no recession). So, why is GOLD going up? In the past (2008,2011, 2020, 2022), gold and stocks were inversely correlated, but why is this time different? Only a correction may make things clearer. (Or, Forsyth could have just said that nobody knows anything, but he had a column to fill.)
Pg 9, STREETWISE. HOUSING super-app Zillow/Z has sold off due to weak housing sales and recent changes in the antiquated real estate commission structure (but Z gets a cut from those commissions for its listings). Zestimates are making people happy even when they are sitting on low-rate mortgages and not selling. Z has a mortgage business and may expand into appraisals, renovations, insurance (but remember that its house-flipping business flopped). Bulls think that it can make up for losses on commission revenue with growth in the new areas.
With SP500 earnings estimates of $241.71 for 2024 (much of it backloaded to Q4, a common analyst trick), it’s trading at fwd P/E of 21.7. Do your own calculations if earnings come in lower. You heard it here again – this big tech rally is on borrowed time.
(More later….)
LINK
Pg 28, TRADER. This mega-cap BULL market will continue. The Fed didn’t do anything to derail it (posture is bullish hold). The AI hype lives on. The semi-ETF SOXX is strong. Investors are buying dips, and there is high FOMO. Don’t fight the bulls although correction is possible. AAPL has been a drag, but it too may catch bids here.
According to BoA survey of fund managers, some money is flowing from the US SP500 (fwd P/E 20.7) to Stoxx Europe 600 (fwd P/E 13.8). The 10-yr yields are US 4.19%, UK 4.1%, Germany 2%.
Home furnishing retailer RH may get a boost from its earnings report on 3/26/24. In 2023, it cleared inventory by offering discounts but that hurt its margins. It’s also growing overseas.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
FOMC 5/1/24+ hold (cycle peak 5.25-5.50%)
FOMC 6/12/24+ cut
FOMC 7/31/24+ hold
FOMC 9/18/24+ cut
FOMC 11/7/24+ cut
(A rare alignment with the FOMC) (Probabilities for some rate-ranges aren’t high, so there can be some unexpected moves.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA +1.97%, SP500 +2.29%, Nasdaq Comp +2.85%, R2000 +1.60%. DJ Transports +3.31%; DJ Utilities +0.95%. (Rotating spot Europe IEUR +0.24%) US$ index (spot) +0.97% (remains too strong over 100), oil/WTI futures -0.51%, gold futures UNCH.
YTD (index changes only), DJIA +4.74%, SP500 +9.74%, Nasdaq Comp +9.44%. (Rotating spot Europe IEUR +4.56%)
SENTIMENTS
(ALL sentiments remain good and steady, but they peaked in mid-December)
NYSE cumulative (5-day) A/D LINE rose; ratio of winners:losers 3:1
FUND INFLOWS +/OUTFLOWS-: Stocks +|+, taxable bonds +|-, munis +|0, money-market funds +|-. (NEW FORMAT: 4wMA|weekly change)
(All flow levels remain positive)
AAII Bull-Bear Spread +16.0% (above average). (Thursday-Wednesday)
(Sentiment Scale: v low << avg - 1*SD; low < avg - 1*SD; below avg, avg, above avg for in-between; high > avg + 1*SD, v high >> avg + 1*SD)
ybbpersonalfinance.proboards.com/thread/141/aaii-sentiment-survey-weekly?page=12&scrollTo=1285
%Above 50-dMA for NYSE-listed stocks 70.06% (just overbought); (StockCharts $NYA50R for NYSE; $SPXA50R for the SP500 in the bottom panel),
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 74.4% (overbought); a proprietary index for %Above 75-dMA for selected 1,800 stocks that is published midweek but is updated by Barron’s only on late-Fridays (so, it typically LAGS). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
(Common Scale for %Above: oversold < 30-; 30 < negative < 50-; 50 < positive < 70-; overbought > 70; note that Delta MSI itself uses all in/out using 50% neutral value, but the same graduated scale is used here for both sources of %Above.)
Pg 31, INTERNATIONAL TRADER. ARGENTINE bonds have rallied from below 40c (on par) to 50c since President MILEI took office on 12/10/23. This despite President’s major proposals rejected by the parliament; he has moved on to Plan B. But he has delivered on some of his promises by presidential actions/decrees. Inflation has been slashed; primary budget (without debt service) has been balanced.
Pg 32, OPTIONS. Short-term options (=< 5 days), especially the ODTE, are the newest fad or mania. These are only for speculation, while the longer-dated options are for both speculation and hedging. There are now more shares controlled by options than the shares themselves and that may cause market instabilities. Some high-priced stocks are also favorites of options traders.
SP500 VIX 13.06 (low), Nasdaq 100 VXN 17.04, options SKEW 154.84 (high), bond MOVE 91.04 (Yahoo Finance data).
(Low VIX, high SKEW combo is a sign of nervous bulls)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 45: An up week in EUROPE (Netherlands +3.62%, Denmark -0.49%) and a good week in ASIA (Japan +5.42%, HK -3.30%) (Japan started tightening; HK & China sat out the global rally).
TREASURY* 3-mo yield 5.46%, 1-yr 4.98%, 2-yr 4.59%, 5-yr 4.20%, 10-yr 4.22%, 30-yr 4.39%;
REAL yields 5-yr 1.79%, 10-yr 1.87%, 30-yr 2.10%;
FRNs Index** 5.315% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose ^DXY 104.43, +1% (pg 50). GOLD rose to 2,172, +0.4% (Handy & Harman spot, Thursday; pg 52); the gold-miners fell. (^XAU was at 119.21, -1.07% for the week)
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
US SAVINGS I-Bonds**, NEW rate from November 1, 2023, is 5.27%; the fixed rate is +1.30%, the semiannual inflation is +1.97%.
(NOTE – The Social Security COLA for 2024, based on the Q3 average of CPI-W, is +3.2%)
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS)
www.treasurydirect.gov/auctions/announcements-data-results/frn-daily/
www.treasurydirect.gov/marketable-securities/
***For local rates www.depositaccounts.com/banks/rates-map/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 16, COVER STORY, “MEDICARE ADVANTAGE is Under Fire. What it Means for your Healthcare”. There are TV ads aggressively pitching for Medicare Advantage (MA; also called Part C) – some claims are genuine, but others may be overhyped. Insurance brokers get higher commissions for signing up people for the MA vs the Medigap. Participation in MA plans is rising steadily at +7% and is now at 50%+ of all Medicare-eligible people. Their low costs, all-in-one aspect (A + B + D + extras), and some extra coverage (eye, dental, gym, etc) are appealing. But remember that once in MA, it may be hard to get back into original Medicare (especially, the Medigap). It isn’t a 2-way street, but rather a 1-way street, and the data show that only about 2% of people on MA can get back into original Medicare (a sticky point is medical underwriting required for Medicap with the initial signup being the only exception). Unfortunately, some are just skipping Medigap, but that is costly and risky as Medicare covers only 80%. Some MA plans are under financial stress and may try to cut corners by playing games with preapprovals, denials, step-treatments, etc; this may be more for MA-HMOs, less for MA-PPOs. The Government is also investigating some MA plans for abuses such as upcoding, overbilling, etc. The Government’s costs for MA are also rising. Some providers refuse to accept Medicare and/or MA due to lower reimbursements, paperwork requirements, etc.
Pg 7, UP AND DOWN WALL STREET. This global EVERYTHING-rally powers on. The DJIA 40,000 isn’t far away (time to reprint all those old out-of-print books?). Most global central banks are in easing or hold mode, except for the BOJ and SNB. The fed fund futures market finally seem to be in line with the FOMC projections (3 cuts of 25 bps in 2024). The US GDP growth is +2.1% est, core PCE +2.6% est, unemployment rate 4.0% est. POWELL reiterated +2% average inflation target “over time” and hinted higher rates for longer. The Fed rate cut may be in June or later. For 12 months, stocks are up +33%, housing prices +6%, household wealth +9%, but let’s go along with the Fed if it sees the financial conditions as tight (some areas of economy may indeed be facing tight conditions).
Why is the fear gauge VIX so low? Some say that the options-based ETFs (giant JEPI & others) may be one of the reasons. Massive call-writing (-selling) by these ETFs and related dealer-hedging has depressed VIX. Skeptics say that the options market is too big for such distortions, and that volatilities are down across the board. They point to factors such as the Fed (lower rates eventually), declining inflation, economic (no recession). So, why is GOLD going up? In the past (2008,2011, 2020, 2022), gold and stocks were inversely correlated, but why is this time different? Only a correction may make things clearer. (Or, Forsyth could have just said that nobody knows anything, but he had a column to fill.)
Pg 9, STREETWISE. HOUSING super-app Zillow/Z has sold off due to weak housing sales and recent changes in the antiquated real estate commission structure (but Z gets a cut from those commissions for its listings). Zestimates are making people happy even when they are sitting on low-rate mortgages and not selling. Z has a mortgage business and may expand into appraisals, renovations, insurance (but remember that its house-flipping business flopped). Bulls think that it can make up for losses on commission revenue with growth in the new areas.
With SP500 earnings estimates of $241.71 for 2024 (much of it backloaded to Q4, a common analyst trick), it’s trading at fwd P/E of 21.7. Do your own calculations if earnings come in lower. You heard it here again – this big tech rally is on borrowed time.
(More later….)
LINK
