Good Afternoon 👋
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Choppy day in the U.S markets today as stocks cool off after Friday’s epic run. Today’s economic reading came in hotter then expected, you know what that means by now, inflation fears are once again testing the markets. Rates shifted up with the 10Yr treasury closing 5bps up to 1.65%. Cryptocurrencies are on a wild ride since a tweetstorm from Elon Musk brought to light an article that argues Bitcoin is not only more centralized then what the public believes but also that it is not environmentally friendly to mine/hash, both central activities to Bitcoin’s functionality.... YIKES!
Headlines:
🌆 NY is back! on Today’s Economic Front, NY State Manufacturing data came in hotter than expected, with NY activity being fueled by the reopening. The report that surveys 200 different manufacturers shows that economic activity continues to tilt higher as people rush back to their pre-pandemic lives. Also in the news, Gov. Cuomo announced that vaccinated people can stop wearing masks starting Wednesday May 19th. Seems like NYC is already back to normal, will other major cities follow? More news (Here).
🛫 Summer plans U.S Air travel registered 1.8M passenger flights this past Sunday, marking the biggest number since the start of the pandemic on March 2020. As vaccinations continue to pick up, the CDC alongside State officials will revert mask and distancing guidelines which is now lining up to be a good summer. More from (Reuters).
💰 My Precious! (gold) Precious metals got a huge bid on Monday’s trading session as inflation fears continue to mount up and market participants position themselves to deal with the anticipated inflation. Conversely, the precious metals have lagged as inflation hedges in 2021 with both Gold and Silver underperforming almost every other asset class in the market. The metals seem to be waking up now, will the precious metals finally serve its purpose? More info (Here).
Without further delay, the tale of the tape:
Tale of the Tape
As of 5/17/21 close.
U.S Markets
📈 Markets, Rates and Volatility (VIX) All major indexes ended lower with the Russell2000 and small caps showing some sign of relative strength (R/S) against the broader market. the Nasdaq started its 5th consecutive week with losses, putting a halt to the recovery for now. The tilt in the markets today to energy and the more cyclical sectors comes on the back of the everlasting rotation in the markets. Once again, inflation fears are causing rates to rise and the 10yr Treasury seems to want to retest that 1.7% high that we saw a few months back. If rates were to make a new high or a clear path upwards to retest those highs, we could see a more vicious rotation then we’ve had so far. Volatility (VIX) creeped up back above 20, closing the day just a few points off that psychological level. In terms of market direction, we did not get a clear follow-through from Friday’s run, the markets performed relatively flat. Tomorrow’s price action will be important to determine if we are bottoming or if we continue to see more volatility in the high growth/high PE stocks.
Here’s a look on every sector in the S&P500 from SPDR.
⚠️ The Wall of Worry In this fast paced market, it is key to note the themes that seem to be impacting stock market performance so that we keep track of its progress and can inform ourselves to tactically adjust. In my opinion, these are the most important issues that are keeping volatility and market rotations in place.
Updates as of 05/17/21:
Inflation transitory vs permanent: NY Manufacturing data came in hotter than expected. The bigger picture is showing improved signs of business sentiment so inflation is once again in the spotlight. We will only know progressively if there is any bad inflation and a lot more clearer into Sep/Oct.
Fed Tapering: Fed officials continue to send mixed messages, no tapering in sight for now.
Peak Growth & Asset Prices: No further updates from last time.
Higher Taxes: Capital gains raised taxes for earners over 400k from 29 to 48%. Republicans pushing back on Corporate tax increase from 21% to 28% via the infrastructure bill.
Job Market Recovery: Jobless claims numbers came in 473k vs 492k expected. This is in line with expectations of a downward trajectory given less people need unemployment benefits as the job market “reopens”.
Sell in May and go away: Historically weak seasonality in the month of May is so far proving to be correct. Positive seasonality in the 2nd half of May could prove to be correct as well.
As you can see, the wall is pretty substantial and in some areas getting more focused (Today: Inflation Transitory vs Permanent). We will continue to monitor the above to stay up to date on all the latest news regarding the wall of worry.
No Relevant Earnings Today ~ Tune in the rest of the week for big retail earnings.
Full U.S Earnings Calendar (Here).
Corporate News
👾 Twitch in the hunt for international streamers Gaming streaming platform Twitch is said to decrease prices internally to not only attract more users but level the playing field depending on the specific country. Current sub rates have been universal and twitch is working on maybe penetrating further markets. Details.
📡 AT&T & Discovery Bet on WarnerMedia Just a few years since AT&T bought Warner for 85b (2018), the company is now unwinding its media asset to fight off its massive debt but also strategically surrendering the fight for streaming to other players. Warner will merge with Discovery and AT&T will have some ownership with the deal estimated to have a combined worth of 150B, creating a streaming giant. More info (Here).
🌩 Elons Tweetstorm Tesla & SpaceX CEO Elon Musk went on a mayhem over the weekend, tweeting out several comments regarding bitcoin, its energy consumption and putting into question its functionality as the dominant cryptocurrency. Elon not only gave negatives about bitcoin, but also praised another crypto: Dogecoin and confirmed he is working with the developers to make the doggy crypto more efficient. Bitcoin supporters engaged Elon via twitter and a clash between groups began. Read it (Here).
Meme headlines:
Disclaimer: I am not a financial advisor. This is not a recommendation to buy or sell any securities. When investing, always do your own research and asses your own risk.