Investors are waking up to a whiff of positivity when it comes to stocks, after last week’s first-in-five gain, driven by weak wage growth.
Along with a grim service survey from the Institute for Supply Management, the data sends the message to some that the Fed now has more evidence to start ending its tightening cycle.
But not so fast said ours call of the day. This comes from Eric Peters, the Chief Investment Officer of One River Asset Management, who was chatting with a fellow CIO who offered his own line in the sand for when Fed Chairman Powell puts the brakes on.
Before the pandemic, a heavy jet cost between $7,000 and $9,000 an hour to charter. Now it costs $18,000 to $20,000,” the unidentified CIO told Peters and noting that his own private indicators show a still hot market. “All these guys worth $100 million have been sucked into a portfolio of 75% illiquid investments, 25% liquid. Guys like to spend $3-5 million a year and earn $2 million after taxes. They are bleeding slowly, but even after last year they are still not scared,” he said.
“Powell won’t stop tightening the tourniquet until he terrifies these guys,” he said. They need to feel that their private wallets are not coming back. They need to see their liquid portfolios even lower. They have to incur losses to raise cash. This happens every cycle. We are clearly not there yet.
The feel of 2022 was certainly bad, with major indices suffering their worst losses since 2008, including a 19.4% drop for the S&P 500.
SPX.
When it comes to rich getting poorer, Tesla
TSLA
CEO Elon Musk has become the only person in history to lose $200 billion, since peaking in wealth in November 2021, which some attribute to his time-consuming Twitter takeover. plus weak consumer demand in China and elsewhere. Yet elsewhere, according to Bloomberg’s Billionaires Index, Berkshire Hathaway Chairman Warren Buffett is about $3.27 billion richer than he was a year ago.
Peters’ CIO colleague goes on to explain how prices over the past few months have “fallen faster than monetary policy can explain.”
The next couple of months will tell if this is a weird move or something real. But I see problems for equities anyway,” he said. “If inflation stays high, the Fed will go up to 6%. And if inflation falls rapidly, margins shrink as wages remain high, and stocks are again under pressure.
And the economy is moving into an even tougher time for investors – the “stagflation quadrant” that leads to slower growth and lower inflation. “This is a quadrant where you have to look for idiosyncratic alpha, relative value trading,
types of cross-market opportunities. It’s hard.”
Read: ‘Markets will be shaken’ as Fed likely to hike rates, economist warns
the steps
Equity Futures
ES00
are pointing to a higher start for Wall Streetwith the dollar
DXY
continue to fall and bond yields
BX: TMUBMUSD10Y
rising. Oil prices
CL
are receiving a considerable boost as China reopens hopes of continuing to filter through the markets. Meanwhile, gold
GC00
reached new multi-month highs.
For more market updates and actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.
The buzz
On Monday, three US-listed biopharmaceutical companies received takeover offers from European drugmakers. CinCor Pharma Shares
CINC
are up more than 100% in premarket trading after AstraZeneca
AZN
announced a deal worth up to $1.8 billion. Amryt Pharma
amyt
is seeing similar gains after a $1.5 billion takeover deal announced by Italian Chisi Farmaceutici and French Ipsen agreed to buy liver drug maker Albireo Pharma
ALBO
for at least $952 million.
Shares of the biopharmaceutical gene therapy group Ocugen
OCGN
are up 7% after announcing positive results from a COVID trial.
lululemon stock
lulu
collapse in premarket after sportswear manufacturer lowered its margin guidance. Nike
NKE
and Under Armor stocks
UAA
fall in sympathy.
China’s long-running crackdown on internet companies is nearly over, a senior central bank official has reportedly said. It helped spur a slew of companies rising in the market, including Alibaba
baba,
who was also on the news co-founder Jack Ma is driving control from affiliated company Ant Group, potentially reviving IPO plans.
Goldman Sachs
GS
is preparing to lay off 3,200 workers this week, according to Bloomberg.
Speaking of banks, the fourth quarter earnings season kicks off Friday, with Bank of America
BAC,
JPMorgan Chase
JPM,
and Citigroup
VS
lined up to report.
A cargo ship briefly ran aground in Egypt’s Suez Canal, stalling traffic and rekindling memories of 2021, when a similar incident blocked the vital waterway for six days.
It’s another week of big data, highlighted by the CPI report due on Thursday. For Monday, we’ll have the New York Fed’s inflation forecast, comments from Atlanta Fed President Raphael Bostic, and consumer credit.
The best of the web
At least 300 were arrested in Brazil after Pro-Bolsonaro rioters stormed government buildings Sunday, an event that echoed the January 2021 uprising in the American capital.
Globalization is not dead faces a big extreme risk, according to this expert
Gen. The Z’s are dust off their parents’ digital cameras
Autistic journalists got French President Emmanuel Macron talking marry his former teacher.
Table
Stock tickers
Here are the most searched tickers on MarketWatch as of 6 a.m. EST:
|
Teleprinter |
Security Name |
| TSLA |
You’re here |
| BBBY |
Bed bath and beyond |
| EMG |
GameStop |
| Muln |
Mullen Automotive |
| HKD |
Digital AMTD |
| CMA |
AMC Entertainment Holdings |
| nio |
nio |
| AAPL |
Apple |
| baba |
Alibaba Holding Group |
| MONKEY |
AMC Entertainment Holdings Preferred Stock |
Random plays
The men behind the note in a 135 year old bottle of whiskey
Aussies flock to a flower that blooms every few years, but stinks of dead rats.
Farewell to the best restaurant in the world.
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