MARKETS TODAY August 28th, 2023 (Vica Partners)
Overnight/US Premarket, Asian markets finished higher, Japan’s Nikkei 225 up 1.73%, China’s Shanghai Composite up 1.13% and Hong Kong’s Hang Seng up 0.97%. S&P futures opened trading at 0.46% above fair value.
European markets finished higher, France’s CAC 40 up 1.32%, Germany’s DAX up 1.03% and London’s FTSE 100 up 0.07%.
Today US Markets finished higher, NASDAQ up 0.84%, S&P 500 up 0.63% and the DOW up 0.62%. 10 of 11 S&P 500 sectors advancing: Communication Services +1.05% outperforms/ Utilities -0.04% lags. Trending Industries: Hotel & Resort REITs, Real Estate Management & Development, Energy Equipment & Services, Industrial Conglomerates. On the upside, Nasdaq 100 ^NDX, Russell 2000 ^RUT, SPDR S&P Banking ETF ^KRE, Semiconductor ETF ^SOXX, KraneShares CSI Tech China ETF ^KWEB, Small Cap Value, Gold Futures, Oil Futures WTI, Bloomberg Commodity Index.
In US economic news, none scheduled.
Takeaways
- Nasdaq Composite ^NASX leads majors +0.84%
- Russell 2000 ^RUT +0.83%/ SPDR S&P Banking ETF ^KRE +1.44%
- 10 of 11 S&P 500 sectors advancing: Communication Services +1.05% outperforms/ Utilities -0.04% lags.
- Trending Industries: Hotel & Resort REITs +2.53%, Real Estate Management & Dev +2.17%, Energy Equipment & Services +2.04%
- KraneShares CSI Tech China ETF ^KWEB +2.87%
- Small Cap Value Stocks rise
- Gold, Oil Futures, Bloomberg Commodity up
- FDIC regional bank rules tomorrow with Options market heavily shorting Regional Banks
- Trendwatch: Energy Equipment & Services past 3 Months +22.76%
- Nothing newsworthy to report on earnings
Pro Tip: McClellan Volume Summation Index measure volume of shares on the NYSE that are advancing compared to the number of shares that are declining.
Sectors/ Commodities/ Treasuries
Key Indexes (5d, 20d, 50d, 100d, 200d)
S&P Sectors
- 10 of 11 S&P 500 sectors advancing: Communication Services +1.05% outperforms/ Utilities -0.04% lags.
- Trending “on the Day” Hotel & Resort REITs +2.53%, Real Estate Management & Development +2.17% Energy Equipment & Services +2.04%, Industrial Conglomerates +2.02%, Leisure Products +1.38%, Metals & Mining +1.35%, Semiconductor & Semiconductor Equipment +1.32%,
- *1 Month Leaders: Communication Services +1.81%, Energy +1.60%
- *YTD Leaders: Communication Services +38.57%, Information Technology +37.92%, Consumer Discretionary +29.11%
- *S&P 500 +14.75% *as of Aug-25-2023
Factors
US Treasuries
Earnings
Q2 ’23 Top Line Top Line
- Q1 ’23 Actual: 79% of companies beat analyst estimates by an average of 6.5%
- Q2 Forecast: S&P 500 EPS was expected to decline <7.2%>/ Fiscal year 2023 EPS flat YoY
Q2 Seasonal Actual (TBA)
Notable Earnings Today
- +Beat: BYD ADR (BYDDY), Heico A (HEIa)
- – Miss: Nordic American Tankers (NAT)
Economic Data
US
- None scheduled.
Vica Partners Guidance
Vica Partners Economic Forecast
The Federal Reserve as of August 2023 was no longer predicting Recession; to quote Investor Jeremy Grantham “the Federal Reserve record on predicting recessionary cycles is guaranteed to be wrong! Pundits can all agree that the Fed has never called any recession in-kind.
So why don’t we support the soft-landing scenario…
- Vica forecasts that the US will have a Recession, starting as early as Q4 ’23 and deep into ’24: the combination to date of Fed tightening, surging oil prices, stock market overvaluations and a strong dollar will shortly give us our bottom.
- Market bottoms are made on bad news and with deflationary signals: economic reports are currently mixed and arguably too much focus placed on product prices and weekly jobs. Our biggest concern is rising interest rates and the depressing slow-moving effect it has on the Real Estate market. And… all with Consumer debt rising to historical highs.
- Current S&P 500 Sector Metrics support contraction: strong trends in the Energy sector indicate the US is in a late business cycle (see chart below).
- A correction in excessive market asset valuations: the current shift from Growth to Value stocks and the Information Technology sector pullback are both underway.
And why…
- The Federal Reserve has limited power in controlling inflation: applying old school economic principles is ineffective in a highly automated and expanding global economy. By simply raising rates to counter jobs (1.6 jobs available for every job seeker) will NOT moderate on demands.
- A 2% inflation target is not realistic today: perhaps a >3% base rate could help fund a) appropriated wages for skilled workers and training b) an executable and efficient energy transition c) improving operational efficiencies across the economy d) and most importantly (look at China today) protection from deflation!
News
Company News/ Other
- Instacart’s Value Comes Down to What Matters: Growth or Profits – Bloomberg
- Goldman Is Selling a Wealth-Advisory Unit to $240 Billion Money Manager – Bloomberg
- Please Support This Ice Maker: Big Manufacturers Try Crowdfunding to Market-Test Products – WSJ
Energy/ Materials
- How an Oil Giant Took Control of Biden’s Billion-Dollar Bet on Carbon Capture – Bloomberg
Real Estate
- Rising Insurance Costs Start to Hit Home Sales – WSJ
Central Banks/Inflation/Labor Market
- Signs of Consumer Weakness Emerge in Canada Despite Retail Gains – Bloomberg
- Rising Gasoline Prices Hit Inflation-Weary Americans – WSJ
- You’ve Heard of Quiet Quitting. Now Companies Are Quiet Cutting. – WSJ
- Economists Turn Even More Downbeat on China’s Growth Outlook – Bloomberg
Asia/ China
- US-China tech war: Beijing wants young tech talent to play leading role amid self-reliance push – SCMP
