November 20, 2024 | Policy
Andrew Graham, CFA
Managing Partner at Jackson Square Capital, LLC | Author of Inside Markets Newsletter
MARKETS
S&P 500: Down -30 points to 5887, VIX: 18.19
Asia: Japan -0.16%, China +0.66%, Hong Kong +0.21%
Europe: Euro Stoxx 50 -0.43%, FTSE -0.18%, DAX -0.31%
FX: USD (DXY) up 0.64%, EUR down 0.73%, GBP down 0.33%, JPY down 0.44%, CNY down 0.08%
Energy: WTI Crude up 0.37% to $69.65, Brent up 0.04% to $73.29
Cross markets: Terminal rate up ~1bp at 4.65, Implied rate cuts 2-years from terminal up ~3bp at 82bp, 2/10 yield spread +10bp
Treasuries: 2-year yields up ~1bp at 4.293%, 10-year yields unch at 4.396%, 30-year yields unch at 4.583%
WHAT WE'RE THINKING
Snapshot: US equities?are mostly lower but off worst levels following headlines of more Ukrainian missile strikes inside Russia. Disappointing results and guidance from?TGT add to the downbeat tone and weigh on other retailers including DG, DLTR, KSS, M, GPS and JWN.??WSM is an exception with shares up ~30% after a big beat and raise. Health Care outperforms with a small rebound in pharma and broad strength in managed care providers.??QCOM is lower after yesterday’s analyst meeting but all eyes are on NVDA earnings after the close.??An earnings beat seems widely anticipated with expectations for FQ4 revenue guidance starting at ~$38B and incremental clarity on the timing of the Blackwell ramp.??Treasury yields are mixed with curve flattening.??The Dollar Index is higher and erasing the slight pullback from the last two sessions. Gold is higher, while copper and WTI crude are little changed.??
Policy: The financial press continues to refer to tariffs as inflationary, which isn’t technically correct.??Assuming it doesn’t reoccur, a tariff is just a price adjustment that can translate to a temporary increase in inflation.??And while there’s still a lot of uncertainty, we also doubt the incoming administration will pursue a broad set of inflationary policies.??Whether it was pursed or not, the outgoing administration encouraged inflation through a massive increase in fiscal spending when supply remained constrained due to the pandemic.??The economics team from Trump’s first term were mostly supply-side economists with the current list of front-runners for Treasury Secretary and other economic positions fitting that mold.??Supply-side economists would likely endorse increased supply to cure sticky inflation – and one of the reasons to expect lower energy prices in the future.
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More: We expect the Fed will end up cutting rates in December to 4.375% with the updated dot plot showing higher rate expectations further out on the curve (raise the longer run dot). We also expect the ’25 median dot to imply 50bp of cuts next year vs. 100bp currently.??At the moment, Fed officials sound like they will pause at the January meeting as they shift more toward data dependency.??This new phase will likely introduce more rates volatility and possibly more equity market volatility.?
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Risk: Elevated levels of implied equity volatility (VIX >22) is the number one near-term risk for equity markets.??Higher levels of equity volatility tend to follow more volatile rates/bond markets.??In the current environment, a short-term move in 10-year yields above 4.60% would likely result in a VIX>22.
FACT OF THE DAY
To earn IGBC Certified Bear-Resistant status, products must meet specific criteria, and either pass a live bear test using captive grizzly bears or a technical evaluation in order to appear on the list.??
领英推荐
JSC IN THE MEDIA
The Close on Bloomberg:??Andrew discusses AMDs downbeat earnings report and its challenges gaining meaningful market share in AI training. He also highlights a potential opportunity for AMD and others when the majority of AI workloads transition from the training to inferencing. Watch Now
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American Express Earnings: Andrew discusses AXP as a relative safe haven and fully-valued stock, while shifting attention to the opportunity in regional banks. Watch Now
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Markets react as tensions rise in the Middle East: Andrew comments on recent events in the context of a market that is richly valued and therefore more sensitive to shocks of all kinds. Read on Reuters
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THIS DAY IN HISTORY
November 20, 1982: At just age 7, Drew Barrymore becomes the youngest host of Saturday Night Live.
CATALYST CALENDAR
Tomorrow: 1) Australian jobs for April; 2) Japan machine tool orders for April; 3) ECB economic bulletin; 4) US weekly continuing claims; 5) US import prices for April and; 6) earnings before the open: Deutsche Telecom, DSX, EQM, Merck KGaA, Prudential PLC, WIX and WNC. After the close: AMAT, CDR, FTCH and NLOK.
Friday: 1) China April Industrial Production, retail sales, Fixed Asset Investment and jobless rate; 2) India imports/exports for April; 3) Germany’s Q1 GDP; 4) Eurozone Q1 GDP; 4) Eurozone trade balance for March; 5) US retail sales for April; 6) US Empire Manufacturing Index for May; 7) US Industrial Production for April; 8) US Michigan Confidence for May and; 9) earnings before the open from DKNG, JD and VFC.
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This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.