[Insert Dad-Joke Market Related Thanksgiving Pun]
What the Market? - Nov 22, 2021
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What the Market?
It’s that time of year where we all indulge the gluttonous devil inside us, and stuff ourselves into a lethargic slumber known as the food coma. Mr. Market is ready for it! As volatility picks up, analysts can find some solace in it being a short week; which will give them plenty of time to unpack all of the economic and non-economic data that is about to be released. Analysts can work through their anxiety as they process the new information over the holiday and await the confirmation of Biden’s pick to replace the Chairman of the Fed. As expected, the media has made an effort to make everything seem like the end of times. Can’t get enough click! click! clicks! ya yickity yackers!
What’s driving the market?
Is it time to say goodbye!? Probably not, but let’s make some drama anyway. President Biden faces one of the most important economic policy decisions of his mandate. By the end of the week the President will have to select the next Chairman of the Federal Reserve. The leading candidates that Biden has opted to interview for the position include the current chairman, Jerome Powell, and the current Fed Governor, Lael Brainard. Brainard currently leads the Committees on Financial Stability and Payments, Clearing and Settlements (remember Gamestop?). Both are dovish candidates liked by Democrats. So not much fuzz or surprise. Mr. Market is expecting Powell to retain his position.
So who’s the Brainard fella anyhoo? Brainard is considered to be a bit more dovish than Powell (if that’s possible), which could cause a small stir in the markets. A Brainard appointment could mean interest rates would rise at a potentially slower rate, and policy tightening may take longer. In practice, this could mean the asset purchasing program would hang around a little longer as well as low interest rates (and more inflation?). Both candidates are expected to get approved by the Democrat-controlled Senate, but a Powell nomination would be well received by Republicans as an endorsement of his steady hand during the Trump years and his handling of the PANDEMIC.
I may be sad, but I will still give you my money! Retail sales figures came in strong in October as early holiday shopping kicks off despite the consumer sentiment hitting a 10-year low fueled by inflation fears. Additionally, big box retailers reported fairly strong earnings last week and gave guidance that they expect the performance to keep up. Manufacturing rebounded as inventories are approaching 10 year lows. While that doesn’t sound good, it kind of is. Low inventories are a result of supply chain issues which have caused retailers to run through their stockpiles. Economists expect companies to replenish their inventories and potentially boost US GDP by as much as 0.5% next year. While it feels like things are suddenly getting more expensive ( nominally they are) but the reality is that with supply shortages retailers can’t turn over their shelves as fast and so they’re not providing the usual markdowns to push merchandise through. Keep an eye on Black Friday data which will be a great gauge for what to expect for the holiday season and Q4 results in consumer discretionary.
What’s an investor to do?
Thanksgiving is right around the corner and the economy is somewhat on track, don’t expect a whole lot to happen this week. Oh yeah, Europe is closing down its borders again due to another COVID wave so expect news about a wave coming this Winter to every town near you. If you’re feeling exhausted from the same narrative, well, so are we, and our suggestion is to turn it off, get the damn vaccine if you haven’t already and go for a walk in the cold air and breathe or take a look at Black Friday deals and work on that 2022 plan.
This is a great time to reevaluate your positions. Take your time to review what you hold and whether it makes sense to keep holding in 2022. Consider if your reasons for buying originally still hold true and be sure to review their recent earnings results. This may be a great time to start rebalancing or doubling down as certain industries have shifted sideways. Lots of opportunities have appeared last month and buying opportunities are scarce.
Keep an eye on the economy
Fed Minutes and PCE Index: As always we suggest tracking the Fed’s minutes where they work very hard to say very little. Look for clues or suggestions about potential timelines for interest rate increases and asset purchasing changes. Additionally, the PCE index is the Fed’s preferred inflation measure which will provide insight into how real inflation is and how seriously the Fed will take inflation going forward.
Monday: PBoC Interest Rate decision, Chicago Fed National Activity Index, Eurozone Consumer Confidence,
Tuesday: Eurozone US and UK PMI
Wednesday: US durable goods orders, jobless claims, housing data, FOMC minutes, Personal Spending data and PCE index
Thursday: Thanksgiving in the US, ECB monetary policy meeting
What we’re vibin’:
Robin by Dave Itzkoff. Few have made us laugh harder and feel more than the late and legendary Robin Williams. Itzkoff takes us through Robin’s story from childhood and finding his initial success and all the challenges he faced along the way. Itzkoff takes us beyond the accents and impressions to reveal the deeper side of Robin’s conscious and extraordinary genius.
Fire in the Sky by Anderson Paak. Did ya’ll catch that Paak single on the Shang-Chi soundtrack? No? Well check it out because it’s fire in your ears (terrible pun intended)
Europe sets the pace after CO26 with new anti-deforestation laws
A content guide to investing (books, books, books!)
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