Bears are still warning that this year's stock rally won't last with many pointing to the financial crisis years of 2008-2009. The S&P 500 hit its 2008 low in early November but rallied +18% that month and +24% in December.
Meaning a lot of investors got sucked back in before the index hit its ultimate bottom in March 2009. From its peak on August 28, 2008, the S&P 500 fell -48%. Investors got caught in similar "bear traps" during the "dot com" bust of 2001-2002 when the S&P 500 fell -49% from peak to trough. Before bottoming in late-2002, the index witnessed four rallies of +19% or more.
Bulls however argue that the current rally has real legs, having started in the tech sector and now expanding to the broader market. Bulls also point to tailwinds up ahead, not least being an expected pause in the Federal Reserve's interest rate hikes at its upcoming meeting next week.
Traders place the odds of a rate hike at the June 13-14 meeting at just over +27% versus 72.5% for a Fed pause. Of course, if the Fed does not pause its rate hikes next week, things could get ugly for for the bulls.
Many Wall Street insiders also warn that markets have already priced in a rate pause, so it may not provide as big of a boost as some may be anticipating. Additionally, the threat of further rate increases has not been taken off the table as the Fed could resume its hikes in July and beyond if inflation remains stubbornly above its +2% target rate.
The next look at inflation data will come from the May Consumer Price Index (CPI) next Tuesday, just as the Fed begins its two-day meeting. Other key data next week includes the Producer Price Index on Wednesday; Retail Sales, the Philadelphia Fed Index, Empire State Manufacturing, Import-Export Prices, Industrial Production, and Business Inventories in Thursday; and the preliminary read for June Consumer Sentiment on Friday.
There are only a handful of earnings report next week with Oracle on Monday; Lennar on Wednesday; and Adobe and Kroger on Thursday.
This is an extremely tough market for many investors. Stocks are rallying higher, and nobody likes the thought of missing out, but at the same time nobody wants to step in a bear trap at these valuations.
Billionaire Investor Ray Dalio Says US is Headed for Major Debt Crisis: Bridgewater founder Ray Dalio said the US is at the start of a "late, big cycle debt crisis." The billionaire investor warned there's a shortage of buyers at a time when the US is selling so much debt. He added the US economy faces tougher times ahead - and forecast a balance-sheet recession. Source Market Insider
Soaring Pilot Pay is Bad News for Travelers and Low-Cost Airlines: Pilots’ pay is reaching astronomical levels, with some of the most experienced aviators earning up to $700,000 and with the industry’s pilot shortage likely to continue for a few years, airlines are negotiating bumper new contracts, meaning expect salaries to continue to increase. The mounting labor costs will affect the whole sector but impact low-cost carriers, such as JetBlue Airways, Spirit Airlines, and Southwest Airlines, the most. There will also be a knock-on effect for consumers as airfares are likely to remain high. The average annual salary for airline pilots, co-pilots, and flight engineers was $225,470 in May 2022, up from $198,190 the previous year, according to the latest available Bureau of Labor Statistics data. Within that, annual income ranged between $56,000 and $700,000, according to pilot training organization Epic Flight Academy. If that sounds good, also keep in mind, pilots are only allowed to fly a maximum of 1,000 hours a year. The average American works just under 1,800 hours a year. Source Barrons
Supply of Homes for Sale in US is About Half What it Was in 2019: Today’s homebuyers are learning that finding a move-in ready home in a good location that they can comfortably afford is about as rare as a winning Powerball ticket. Even in a housing market that has slowed significantly due to rising mortgage rates, the supply of homes for sale is about half of what it was in 2019. The dire shortage has also kept prices strong. That’s left less than a quarter of the roughly 1.1 million home listings within financial reach of the typical American household, according to a recent joint report from the National Association of Realtors® and Realtor.com®. The housing market is short about -320,000 listings within the price range of buyers earning the median household income of $75,000 a year. These buyers can generally afford homes up to $256,000. The popular 30-year fixed mortgage rate hovered in the high-6% range in May. At that level, buyers with an annual income of $100,000, slightly above the national median, could afford a house with a maximum price of about $341,000. But just 39% of the homes for sale were listed at or below that price point in May, according to the report. The problem has worsened significantly over the past five years. In 2018, there were about 810,000 homes on the market that middle-income buyers could afford. That’s compared with nearly 263,000 in April of this year. Source Realotor.com
Construction Boom Fuels Surge in Excavator Sales: Construction excavators are tearing through the equipment market. Companies including Deere, Caterpillar, and CNH Industrial are expanding or upgrading their models of the earth-moving machines that function as jack-of-all-trades at construction sites. Building and infrastructure projects are driving historic demand for excavators. Sales of excavators in North America last year rose 23% over 2021 to 41,320 machines, the second-straight year of record sales, said Off-Highway Research. The London-based consulting firm projects sales will rise another 5% this year, boosted by federal spending on battery plants for electric vehicles, road and bridge repairs, and other nonresidential construction. Excavators, especially small models, increasingly are replacing backhoes and front-end loaders that traditionally have been used to dig holes or move piles of dirt, construction company executives said. Rising excavator demand also is being fueled by labor shortages, according to contractors, as older, higher-skilled workers retire or leave for other jobs. Excavators represented more than half of all construction equipment sold worldwide in 2022, according to Off-Highway. Global sales last year were 52% higher than a decade ago at 635,104 machines. Source WSJ
Vessel Buildup Grows at West Coast Ports, Echoing Covid Chaos: The number of vessels due to dock at the Port of Los Angeles and Long Beach is increasing as labor slowdowns at West Coast port terminals have impacted supply chain operations, from trucks to rails and ocean carriers. Data from MarineTraffic shows that vessel problems are shifting from isolated to more pervasive. Over the past 2½ months, average wait times at anchorage in LA were between a half-day to 1½ days, with service time averaging of two to five days. At the APL Terminals in LA, docked vessels are now occupying space for as many as nine days. “This indicates we’ve broken past the ‘normal’ and are back into a stressed maritime supply chain,” said Capt. Adil Ashiq, head of North America for MarineTraffic. When vessels go off schedule, the delays slide the arrival to additional ports, impacting their container deliveries, and ultimately contributing to container congestion, which was seen in the extreme during the Covid pandemic. Gene Seroka, the executive director of the Port of Los Angeles, said on Thursday morning in a CNBC interview that the situation had improved on Thursday, though cargo is not moving normally. The Department of Transportation and Biden Administration are said to be closely watching the developments at the West Coast ports as trade groups from retail to manufacturing warn of economic damage and urge the White House to step in. Source CNBC
How Motorola Became One of Tech's Biggest Turnaround Stories: Motorola once dominated cell phones, but in the past few years it has become a huge player in public safety—one of the hottest areas in tech. While many big tech companies have struggled recently, Motorola sales and earnings per share both rose by double-digit percentages in 2022, while cash flow from operations increased 40%, and the company rose to No. 418 on the Fortune 500. None of that business came from cell phones, the revolutionary product that Motorola invented—producing the world’s first working mobile phone in 1973—and that made it a household name. Eclipsed by Apple and other smartphone manufacturers, Motorola shed its money-losing consumer phone unit, including its signature Razr flip phone, along with its cell tower business and others, starting in 2008. What remained was the company’s police radio business, a steady-selling but unsexy product that many thought would also soon be replaced by smartphones. Instead, the company’s foothold in that market—along with nearly three dozen acquisitions in recent years—has helped make Motorola the 800-pound gorilla in a business that is booming. Source Fortune
GM Follows Ford's Lead and Adopts Tesla Chargers: General Motors will integrate Tesla’s electric vehicle charging standard in its future EVs, CEO Mary Barra said Thursday during a Twitter Spaces with Tesla CEO Elon Musk. The agreement between the erstwhile rivals comes less than two weeks after Ford announced a similar partnership, and signals that other automakers could soon follow. As with the Ford partnership, owners of GM’s EVs will also have access to more than 12,000 Superchargers across the U.S. and Canada. Barra said its next generations of EVs will be equipped with Tesla’s charge port called the North American Charging Standard (NACS) starting in 2025. Tesla vehicles come with a charging connector that provides both AC and up to 1 MW DC charging. Compared to the Combined Charging System (CCS) connectors commonly used in North American and European EVs, Tesla’s connector stands out due to its compact design, ease of use and better performance. Source TechCrunch
America's Biggest Chip Manufacturers: As our world moves further into an era of widespread digitization, few industries can be considered as important as semiconductors. These components are found in almost everything we use on a daily basis, and the ability to produce them domestically has become a topic of national security. The graphic below ranks the top 15 US semiconductor companies by market capitalizations. At the top is Nvidia, which briefly became America’s newest $1 trillion company on Tuesday, May 30th. The company's stock price has come down since, and it's market cap is now slightly less than what's shown on the graphic ($951.2 bil as of 6/8). Over the past decade, Nvidia has transformed from a gaming-focused graphics card producer to a global leader in AI and data center chips. In third and sixth place are two of America’s most well known chipmakers, AMD and Intel. These longtime rivals are moving in opposite trajectories, with AMD shares climbing 770% over the past five years, and Intel shares falling 47%. One reason for this is the data center segment, in which AMD appears to be stealing market share from Intel. Further down the list we see Applied Materials in seventh, and Lam Research in ninth. Both firms specialize in semiconductor manufacturing equipment and thus play an important role in the industry’s supply chain. Source Visual Capitalist
We have alternatives that are low in correlation to traditional stock & bond portfolios. They are liquid and transparent. Minimums and fee structures vary and some are performance based only. Returns we can share are NET of Fees.
If you want to learn more, just let me know what works to learn more about your needs.
Schedule A Call Now
Futures trading is speculative and involves the potential loss of investment. Past results are not necessarily indicative of future results. Futures trading is not suitable for all investors.
Nell Sloane, Capital Trading Group, LLLP is not affiliated with nor do they endorse, sponsor, or recommend any product or service advertised herein, unless otherwise specifically noted.
CTG Daily Commentary is published by Capital Trading Group, LLLP and Nell Sloane is the editor of this publication. The information contained herein was taken from financial information sources deemed to be reliable and accurate at the time it was published, but changes in the marketplace may cause this information to become out dated and obsolete.
It should be noted that Capital Trading Group, LLLP nor Nell Sloane has verified the completeness of the information contained herein. Statements of opinion and recommendations, will be introduced as such, and generally reflect the judgment and opinions of Nell Sloane, these opinions may change at any time without written notice, and Capital Trading Group, LLLP assumes no duty or responsibility to update you regarding any changes. Market opinions contained herein are intended as general observations and are not intended as specific investment advice.
Any references to products offered by Capital Trading Group, LLLP are not a solicitation for any investment. Readers are urged to contact your account representative for more information about the unique risks associated with futures trading and we encourage you to review all disclosures before making any decision to invest. This electronic newsletter does not constitute an offer of sales of any securities. Nell Sloane, Capital Trading Group, LLP and their officers, directors, and/or employees may or may not have investments in markets or programs mentioned herein.