Good morning / afternoon / evening - please choose whichever one which best describes when ever it may be that YOU are stumbling across this weekends note…
I will be brief so as NOT to keep one / all from weekend festivities (shoveling, errands, housework all hopefully done BEFORE playoff football … ). At least that was the hope but we’re now knee deep into Ravens Texans game SO … lets jump right in.
I’ll begin with a couple links / bullets I’m getting MY arms around to help comprehend / contextualize record S&P close …
ZH: UMich Inflation Expectation Plunges To Lowest Since 2020, Sentiment Soars ZH: 2023 Was The Worst Year On Record For Existing Home Sales
… AND soaring sentiment aside, days end snark looked like this …
ZH: S&P 500 Surges To New All-Time High Despite Wrecked Rate-Cut Hopes
...but the strong 'hard' data prompted a biig (hawkish) repricing of rate-cut expectations (initial timing and velocity)...
… and with that ‘good news is bad’ and hawkish repricing in mind, I’ll jump right in.
NOW … lets deal with a an important update from the intertubes and one of the greater fixed income managers and THINKERS, really, out there. When someone like this offers insight to process of thought only 4x / year (as opposed to ME in my prior existence (and now, but to far lesser degree) writing 6x a week, well the exclusivity and insight into the workings of Dr Lacy Hunts mind SHOULD be cherished … I’ll pause and direct YOU HERE …
… Demographics and Natural Resources The Standard of Living. The standard of living is either real per capita GDP or real per capita GDI since they are equal measures. On an annual basis through Q3, a record divergence in growth rates of 217 basis points (-0.35 for real per capita GDI versus 1.82 for real per capita GDP) was registered (Chart 2). In such divergent situations the approach of the economic profession is to average the two series. This average grew at just a 0.6% annual rate in the past four quarters (Chart 3), far below the twenty-year average 1.3% per annum and much worse than the post 1970 average of 2.2%.
Under prevailing conditions, the aggregate production function indicates the United States and its major competitors face a prolonged period of subpar economic growth until net national saving turns positive. Indeed, these prospects will likely prompt calls for more deficit spending that will, in turn, serve to worsen NNNS, further impairing resources required for a rising capital stock and, in turn, prohibiting a reversal of this six plus decade decline in the growth of living standards…
… I’ll leave it to you to GUESS the conclusion (itwill NOT shock you, trust me) and I’ll move right along AND right TO the reason many / most are here … some UPDATED WEEKLY NARRATIVES … some of THE VIEWS you might be able to use … THIS WEEKEND I’d note a couple / few things which stood out to ME this weekend … There are buyers and there are sellers. New LONGS, profits booked. SHORTS. You name it, they’ve got it covered …
… the sale we entered in the nominal 10-year space at 3.97% reached our target level on Wednesday at 4.10%, and we were content to book profits and move to the sidelines…
JEFFUpdated Economic Outlook: Big K or Little K? (not as bad as they thought previously)
…The economy is clearly K-shaped, but it looks like we mistakenly estimated that the spending power of the top half of the K would be overwhelmed by weakness in the bottom half…We no longer expect a steep recession beginning in Q1. Instead, it looks like we will have a more mild slowdown, with only 2 quarters of slightly negative growth and 4 total Fed rate cuts
MSGlobal Macro Strat, “Cold As Ice Ice Baby” (getting LONG duration)
… Rates update – correction begins … we think that the correction can continue and see a "first stop" in 10yr yields closer to 4.25%, with support after in the 4.40%-4.55% zone.
Moving along and away FROM highly sought after and often paywalled and Global Wall Street narratives TO a few other things widely available and maybe as useful from the WWW
Hedgopia CoT: Peek Into Future Through Futures, How Hedge Funds Are Positioned (MOAR SHORT)
Invesco Insights: Three things to know about the stock market’s new record high (not much here … )
Key takeaways
Stocks set a new record
Today, the S&P 500 Index hit a new high, surpassing its previous record set in January 2022.
Disinflation was a factor
A resilient economy, quickly fading inflation, and strong 2023 performance fueled the market’s new record.
New highs don’t tell us much
It’s far more interesting to compare the price of an index to the fundamental characteristics of the companies in that index.
Consumer sentiment continues to rise while inflation expectations hit the lowest level since 2020.
Nautilus: Anticipating the Implications of a New All-Time High
SP500 Posts a New All Time High, After a Prior Bear Market (Decline of at Least -20%)
If current prices remain steady, the S&P 500 is on track to surpass its previous high from January 3, 2022, and establish a new all-time record. Looking back in history, there have been 11 similar instances of new all-time highs following bear markets, defined by prior declines of at least -20%. The table below provides a comprehensive overview of the expected return profiles associated with this study. It's important to note that while continued upward momentum is typically observed, returns in the 1-week to 2-month range can be mixed. In the case of 2007, it essentially marked a 'double top,' but in the other 10 instances, strong returns were witnessed from 5 months up to 1 year forward.
StateStreet Global Advisors: Q1 Bond Compass: Rate Cuts Mean New Challenges/Opportunities
A Tale of Two Feds With rate cuts on the horizon this year, new challenges — from reinvestment risk to rate volatility — replace the rising rates and elevated volatility that defined a turbulent 2023 bond market.
… Throughout 2023, realized 90-day volatility for the Bloomberg US Aggregate Bond Index (Agg) ranked above the 90th percentile every day, even after the Fed signaled rate cuts (Figure 3). Notably, Fed policy is evolving at a time when global growth, including for the US, is expected to slow below long-term averages (2.9% versus 3.5%).12 Leaving little room for error.
StockCharts.com: Dow Jones and S&P 500 Close At Record High -- Time to Add Tech Stocks To Your Portfolio?
… AND for any / all (still)interested in trying to plan your trades and trade your plans in / around FUNduhMENTALs, here are a couple economic calendars and LINKS I used when I was closer to and IN ‘the game’.
First, this from the best in the strategy biz is a LINKthru TO this calendar,
THAT is all for now. I will try to organize some more of a shorter-term rates outlook (charts) before tomorrow night — there IS supply (2s, 5s and 7s) to contend with but ran outta time. Back TO family … Enjoy whatever is left of YOUR weekend …
No Link for the weekly narrative wrap up?
Got my workout, power steering flush, laundry, and grocery runs all finished before gametime :)
Damned Jordan Love turned pumpkin in those final minutes last night :(