Here's the Deal - October 13, 2024

Economy: In Slowdown

Market Cycle: Bullish

_{Week 41 of 52 for 2024: 79% of the way through 2024}

Weekly Note:

• Ongoing market volatility driven by natural events, the election, and economic uncertainty.

• Lack of insight into the size of stimulus from China weighing on global commodities.

• Strong bank earnings led by JP Morgan, which is a bright spot in the financial sector.

• Higher-than-expected inflation reports, suggesting continued pressure on prices.

• Rising 10-year Treasury yields, which impact borrowing costs and market outlook.

• Happy 2-year Birthday to the Bull Market!!!

Volatility continued to remain high this past week, driven by several significant events and developments as well as the approaching Presidential election.

The first of which was Hurricane Milton, which dominated headlines as the storm intensified to a Category 5 quickly as it barrelled toward Tampa, FL. Fortunately, and as expected, the storm weakened to a Category 3 as it made landfall. The biggest blessing was the “reverse surge” which led to far less death and destruction than was feared heading into the event.

Then came more insights into China’s new stimulus package on Tuesday. Only problem was, it lacked insights. Which again called into question China’s commitment to reviving their economy. The result of which hit crude and copper prices. However, markets told you that they were willing to wait until the weekend announcement before bailing and once again leading to a false bottom in Chinese names. And markets appeared to be right again as China announced $325 Billion in fresh stimulus late Friday night, according to Barchart. This is at the high end of the $142B - $425B economists were expecting.

On the inflation front, the Consumer Price Index (CPI) came in slightly higher than expected while the Producer Price Index (PPI) came in at or close to expectations. This could mean that inflation is sticking around, which would put additional pressure on the Federal Reserve that has now begun their rate cutting cycle. It is important to remember that one month’s worth of data does not equal a trend, so at this point the correct mindset regarding inflation is cautiously optimistic.

Amid all this, there was some good news for the financial sector as the banks got earnings season off to a great start by beating expectations for the most part. Sure, they may have recently reduced their forecasts and then proceeded to “shockingly” beat those recently lowered forecasts. Pretty standard Economic Slowdown shenanigans, but whatever. A win is a win.

Finally, the rising 10-year Treasury yield continued to be a key story. Higher yields often mean investors expect more inflation and/or that the Federal Reserve will have to ease up on their pace of rate cuts.

Personally, I think that the 10-year yields are closer to rolling back over and heading towards at least 3.5%. This coincides with a likely strong Spring for real estate transactions, which will subsequently put the residential real estate sector into its Recovery phase.

Top Economic Stories of the Week:

Most Important Data Drops from the Past Week:

This Week in Markets

Happy 2-Year Anniversary to the current Bull Market!!!

It was October 13th, 2022 when markets sent a clear bottoming signal. That signal was a large market wide gap down on a much worse than expected inflation report. If this is shocking to read, it shouldn’t be as Bear Markets typically die on horrendously bad news. Likewise, Bull Markets typically die on fantastic news.

No wonder this stuff is so confusing.

As for current markets, they continued to move higher this week. Not shocking considering we are in the middle of a Bull Market and beginning the seasonally strongest period of the year.

With volatility remaining high, and likely continuing to do so until after the election, it could be an active week for markets as earnings season is now under way. Don’t overthink whatever moves will come as the path higher is set.

With China announcing $325 Billion of fresh stimulus on Friday night, the expectation is that it will finally lead them into an economic recovery.

We’ll see if that turns out to be true. In the meantime, I would absolutely not want to be short any Chinese names at this moment. Even Michael Burry, who sees a recession coming every other week has been aggressively buying China. Most importantly, so is David Tepper who is wildly bullish and in his words “buying everything China” right now. If Tepper is there, then you want to be as well as he has nailed practically every major turn the past decade plus. When that guy says he’s going all in, you want to simply shut up and do the same. Of course you want to do so while following proper risk-reward management, as always.

We are now past the point of return for anyone who predicted a recession and market crash the past couple of years. Their bad and uninformed calls of economic annihilation are now well past requiring a major Black Swan event to be relevant. Think about that for a minute. They told you the end was near and their calls are now terribly underwater. Now, they think some dire event will verify their guesses. No professional in any capacity puts their faith into an unknown and unprecedented event to be proven right. Instead, a professional knows the point their thesis becomes wrong, admits it when it happens, and then works to improve their system to reduce the likelihood of it happening again. And that time passed for the bears long ago.

There is nothing wrong with being wrong. On the flip side, everything is wrong about staying wrong and hoping the world implodes bringing chaos and hardship to most so that you can feel vindicated. This is just one reason why perma-bears are dicks and why you shouldn’t listen to their halfwit musings about the world they want at the expense of most people.

On the other side of that coin is finding what prices that affect your daily life are about to head higher, and taking steps that will either make those higher prices easier for you to absorb or even come out ahead on.

With that being said, I hope you enjoyed and got a little out of the post earlier this week regarding ways to play what looks to be higher wheat prices in the near future.

Should commodities do what they are set up to do, and in some cases have already begun doing, then learning how to partake in the action is going to become a necessity as it will be a way to offset higher costs in the future. You do not want to be left behind.

Expect to see more trading/investing opportunities coming your way in the coming weeks. I’ve also begun writing some posts on trading/investing basics in case this is all new to you. Everything from proper risk management, to entering and exiting positions, the difference between a trade and investment, how to set up and read charts, etc. So tell your friends, but not the ones who complain all the time as they will ruin the vibe. Stick to the people who are smart enough to realize that life is always a challenge and intelligently look for ways to make it a little bit easier.

I’m not saying I have all the answers, but at this point I absolutely have WAY MORE than most. The ones I don’t have, I either know where to find them or at the very least I know where to begin searching for them.

The coming week is typically a weaker one for markets in Presidential election years. If true again this year, it would give you a good opportunity to pick up some bargains. After all, who doesn’t love a good sale. If this happens, look for it to get bought the end of the week or beginning of next.

Any questions, let me know.

Don’t be afraid or intimidated by this stuff. Trust me, you’re all smart enough to understand it to the point that it will have a meaningful positive impact on your life. No matter what the market and economy is doing.

The Week Ahead

Economic Data:

Earnings to watch:

WTF of the Week

Good news, Ken here has figured out how to make LinkedIn interesting.

Quote of the Week

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