Year End Santa Claus Rally

The Historically worst month of the year for stocks is over...

Who's ready for a Santa Claus Rally

The Technicals are in Good Shape

Uncertainties

Gov Shutdown
UAW Strikes
The Price of Oil
Mortgage Rates
Rising Auto / C&I delinquencies
Tightening Macro Forces
Recession

Economic Activity

Manufacturing is recovering via government spending and Public/Private sector Investment into Multi-Family homes/apartments and Infrastructure.
The services sector is still expanding, and I don’t think we see that contract this year, heading into the holiday season.

👉🏽 WATCH ISM NEW ORDERS THIS WEEK

Jobs

Are Payrolls still falling?
Is unemployment sneaking higher?
Wage Growth remains sticky.
Employment - may be the most tell-tell sign of the coming recession, but it lags

EconomicGrowth

GDP Growth is around 2.1%, led by consumer and gov spending.

Consumer

In the latest consumer report, we see less spending and less savings but growing incomes.

Consumers are in good shape for Seasonal Spending

Macro Forces

The dollar, Oil, and Long rates are tightening financial conditions

copper & nat gas, and wheat haven’t gone anywhere...these forces are sort of offsetting Oil.

Short Rates Are capped VIA RRP (SHADOW QE)

RATE RECESSION?

Most companies and mortgages are already locked in short rates…
It’s the regional banks, commercial real estate, and floating-rate borrowers who are being hit.
The answer to higher oil prices is higher Oil prices.
If something breaks in the banking system, Rate Risk goes away.
The Fed Balance Sheet likely goes up, and the dollar falls.

WILL THE FED HIKE?

My bet is they pause in the next meeting. Yes, home prices are still rising, but the rate at which they are growing has collapsed, and Rents are experiencing deflation. Core inflation is back in the 3’s, and MoM came in at 1/10th %, the lowest reading of the cycle…