This commentary was issued recently by money managers, research firms, and market newsletter writers and has been edited by Barron’s.
Bear-Market Rallies
Technical Strategy
BTIG
Nov. 11: Thursday was another day for the record books. The
S&P 500
had its first daily gain of more than 5% since 2020, and its biggest outperformance vs. the
Dow Jones Industrial Average
since 2001. Long/short momentum was down nearly 10%, the second-worst daily decline since 2001, behind the November 2020 vaccine day.
Statistics aside, some notable developments were 1) SPX closing back above 3,900, 2)
DXY
closing below 109, and 3) 10-year yields closing below 3.90%. While these are clearly positives and could open the door for the SPX to test ~4,083, Thursday’s action alone is insufficient evidence to change our primary cautious view.
For example, the
Nasdaq 100
(NDX) gained 7.49%. Of the 20 largest NDX daily gains since 1990, 16 of them happened either between April 2000 and May 2002, or in October 2008, none of which marked the end of those bear markets.
Jonathan Krinsky
Downgrading the Dollar
Global Focus
NDR Ned Davis Research
Nov. 10: A maturing interest-rate cycle helps explain several developing performance trends, most notably the waning momentum of the U.S. Dollar Index. This is warranting a dollar downgrade from bullish to neutral. And the dollar demise has been influencing other trends, calling for a regional exposure shift from the U.S. to Europe ex-U.K. and a focus on emerging markets and gold, both now candidates for future upgrades.
Tim Hayes
Sectors and Elections
Market Perspective
Truist Advisory Services
Nov. 9: A lot of ink is often spilled [about] how segments of the market will do based on an election outcome. However, despite a consensus view often contrasting the impact of Democratic or Republican parties on sectors, the recent evidence hasn’t been supportive.
For instance, the top two sectors under Presidents Obama and Trump were the same—technology and consumer discretionary. In our view, this similarity was primarily driven by the post-global financial crisis environment of low economic growth and interest rates.
More recently, after Democrats swept the 2020 elections, there was a consensus view that this would be most harmful for energy stocks, and that financials and healthcare would lag. However, these sectors have actually been the three best-performing areas since the election, with energy by far on top. The energy sector benefited from oil and gas prices being supported by less drilling/supply and energy companies focusing on generating earnings and positive cash flow.
We’ve held a favorable view of the energy sector since early 2021. We also currently favor industrials, healthcare, and staples, as well as a value style tilt overall.
Keith Lerner
Small-Business Pessimism
Quick Takes
Yardeni Research
Nov. 8: The National Federation of Independent Business (NFIB) released its October survey of small-business owners today. They remain pessimistic about the general business outlook. They are still struggling to find workers and to keep them. Their labor costs are rising rapidly and forcing them to raise their prices. They’ve been sucked into the economy’s wage-price spiral.
During October, 32% of small-business owners said that they are planning to raise worker compensation. That’s up sharply from 23% during September. Also in the October NFIB survey, 34% said they are planning to raise their average selling prices.
The percentage of small-business owners with job openings remained very high, at 46% during October. This series is highly correlated with the JOLTS job openings series, which rose to 10.7 million. This supply of jobs exceeds the demand for jobs (i.e., the number of unemployed job seekers) by 4.6 million. There are 1.8 job openings for each unemployed worker.
This is bad news for the Fed, which has been expecting that by tightening monetary conditions, inflationary pressures would ease in the labor market. Fed officials have frequently indicated that they would like to see the JOLTS job-openings series drop. That’s not happening as much as they would like, according to the NFIB survey.
We are still 60/40 [on] the odds of a soft landing vs. a hard landing for the economic outlook. October’s NFIB small-business survey is more supportive of the hard landing scenario.
Ed Yardeni
Yield-Curve Forecast
Nolte Notes—Weekly Commentary
Kingsview Partners
Nov. 7: [Federal Reserve] Chair Powell made it abundantly clear that the Fed would be hiking rates until inflation gets under control. The bond market took the admonishment to heart and interest rates continued to rise, pushing prices lower. Now that very short-term maturities are yielding more than 10-year bonds, a recession “call” is being made by the markets. Each recession has been preceded by this “inversion” of the yield curve.
It would argue, too, that investors should begin buying very long-term bonds as a recession would “force” the Fed to begin cutting rates to help the economy. It may indeed be different this time, as the Fed is on an inflation-killing mission that could keep the rate inversion in place much longer than expected. Going back to the inflation years of the 1970s/’80s, the curve was negative for most of a three-year period. If today is like then, there are many more months of yield-curve inversion ahead.
Paul Nolte
Clueless?
Talking Points
BMO Capital Markets
Nov. 11: Almost no one currently working in finance, economics, markets, or policy-making circles has any real-world experience dealing with real inflation.
Douglas Porter
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