Summary – A top-down review of interesting calls and comments made last week in Treasuries, monetary policy, economics, stocks, bonds & commodities. TAC is our acronym for Tweets, Articles, & Clips – our basic inputs for this article.
Editor’s Note: In this series of articles, we include important or interesting Tweets, Articles, Video Clips with our comments. This is an article that expresses our personal opinions about comments made on Television, Tweeter, and in Print. It is NOT intended to provide any investment advice of any type whatsoever. No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Macro Viewpoints & its affiliates expressly disclaim all liability in respect to actions taken based on any or all of the information in this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerance.
1.What Still Matters!
Dollar was down 40 bps and Treasury rates were down last week. So broad indices were up over 1%; Semiconductors were up strong (SMH up 4.6%) & most EM markets were up with EEM up 2.9%.
- The Market Ear@themarketear – Oct 3 – SPX loves crashing bond volatility
And, another big positive.
- Bespoke@bespokeinvest – Don’t underestimate the positive wealth effect that homeowner equity, which is at levels not seen since the late 1950s, has on the consumer.
Naturally,
- Trader Z@angrybear168 – $SPY weekly tension closed bullish.
And,
- Larry Tentarelli, Blue Chip Daily@bluechipdaily – New all-time highs for NYSE (over 2,000 stocks), equal weight SPX, and small caps, dispels any weak breadth posts. $NYA $IWM $RSP
Channeling an inner bull,
- Ed Clissold@edclissold – With no payrolls data to analyze I channeled my inner @RyanDetrick. In years the $SPX endured a 10% correction and ended Q3 +>10% YTD, in Q4 the index was up every time by a median of 7.5%. Past perf no guarantee, but positive reversals have a bullish track record. @NDR_Research
Exhibiting his own self,
- Ryan Detrick, CMT@RyanDetrick – Oct 2 – When the S&P 500 makes a new high in October the fourth quarter is up more than 90% of the time.
All this index stuff is fine, but any ideas that might do better from here on?
- Seth Golden@SethCL – Planning for 2026? – Staples relative to $SPY is at an ALL-TIME LOW and with a 3std. trailing 18-month performance. All but 1 time this occurred in the history of the performance ratio, $XLP has gone on to materially outperform $SPX in forward 12-month period. $QQQ $PEP $KO $JNJ $WMT $COST
Going back above to the homeowner equity being the highest it has been since 1950s, Rick Rieder of BlackRock pointed out on Bloomberg this week that the age group with the highest total net-worth in the country is the above 70 yrs group. These older savers have NO debt, so if interest rates are high, they earn more income. And it is these people who are driving the consumption in the country.
A huge tailwind in America is the push in infrastructure & the consequent push in cloud, software & AI investments. This is enabling companies to build scale & deliver earnings that are pushing their stocks up. When you make AI as the backbone of your business, you can deliver earnings that seem astonishing. But, as Ankur Crawford of Alger pointed out on CNBC this week, the delivery of spectacular earnings quarter after quarter is what has driven those stocks up. She doesn’t see a slowdown in 26 but wonders whether in 2027, we will start penalizing the companies that are putting so much cash into this. Watch the clip below to get a balanced view of why these companies are delivering seemingly scary numbers:
2. The other side of America in age, income & intensity of problems
This is what Rick Rieder also touched on in his Bloomberg appearance. But for some reason Bloomberg did not include this in their posted clip (from our hastily scribbled notes):
- “labor to me is a big deal; whatever that is playing out in automation, creates potentially a labor problem; … payroll growth is driven by health-care; strip off health care jobs and job growth becomes negative in America; …. it is completely different than what we have seen before … we need to keep more people employed in this country“
There is another angle to a portion of hiring in & by tech firms, as Evan Sohn, CEO of Aura Intelligence pointed out to CNBC’s Steve Liesman on Friday:
- ” … when you are seeing hiring going in in computer software, you might think that’s really good; a lot of those are AI roles; they are really coming to replace other people & that’s what we are seeing; “
And he added “we are seeing a real decline across multiple sectors“. Then he touched on what we consider a big problem in correctly calculating hires & fires in the BLS system. Hopefully, the new administration of BLS will deliver a much more timely & accurate measure of jobs added & terminated. Mr. Sohn touched on this as well:
- ” “we are looking at last September when US created 225,000 jobs. Then there was a revision of 800,000 jobs. When the Fed is listening to the BLS numbers, they are getting it late. Had the numbers been accurate back in June, we would have seen a rate cut in June or July that would have impacted Q4. Had the Fed adjusted its numbers in June or July, we would have seen a better response to Q4 hiring. I think now companies are waiting really for 2026“
We think Mr. Sohn is wrong in expecting the Fed will own up to the wrong BLS data it relies on. Why? Because we heard Austan Goolsbee, Chicago Fed President, praise the BLS data as the best last week on CNBC.
3. When it hits the fan! What might stave off a recession?
By mid-last week, everyone who listens to Fin TV had heard of the bankruptcies of Tricolor & First Brands. Before we go on, we must thank CNBC’s Scott Wapner for being way early in letting Jeffrey Gundlach express serious concerns about Private Credit on his post-Fed show.
Again this week, he was the one CNBC host who invited Marc Lasry, the famed credit investor, to get his views.
The most important opinions from Marc Lasry are as below:
- “… the economy is slowing down; you are going to have less earnings; so you are going to have more issues; so this could be the beginning; but the one thing you have got is that could be a savior is the Fed keeps on lowering rates because then the cost of capital is going to keep going down”
- “… I think if that continues, you are going to have a mini recession; but the fact that the Fed is going to lower rates might end up staving off that recession”
We hope Mr. Lasry is right but history doesn’t concur. The later you begin a concentrated easing campaign, the slower it takes for the medicine to act & you need to inject more rate cuts. The history of the Fed is that they begin too late & then proceed far slower than warranted. The end result has been a longer, more protracted recession that forces more & deeper interest rate cuts.
And this particular Fed seems more obstinate & shortsighted than the previous ones. Lorie Logan, the Dallas Fed President, says inflation is the main issue & warns against premature (!) rate cuts. We wonder whether she had even heard of Tricolor, a Texas company whose bankruptcy shook the Asset Backed market last week. And Austan Goolsbee, President of Chicago Fed, is also warning against rate cuts.
This is despite the facts we read/heard late last week that:
- ” 69% of Americans are now living paycheck to paycheck; 25% are using buy-now-pay-later to pay for their groceries”
Going back to how we began this article, the first couple Fed rate-cuts do lead to strong rallies because such rate cuts, as Mr. Lasry said above, are believed to be enough to stave off recessions. In the meantime, shall we all follow Hartnett’s published Zeitgeist?
- “These credit cracks a big deal, but not big enough to put top in right now.”
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