Livin' On the Egde

 

I told you Monday was going to be fun. The markets were all over the place on Monday. I looked at the intraday performance of the Russell 3000 names. Here are some quick facts. 35% of the names were down more than 5% on the day at some point. 76% were down 2.5% at some point. Also, 17% were up 5% at some point, and 45% were up 2.5% at some point. The average range for the names in the index was 7.4%. That’s some serious volatility in US equities. I checked the same versus the FTSE Developed Market exUS and it’s there’s much less to the upside. Monday was mostly just a down day, but the US positive afternoon didn’t transfer over to Tuesday. We squeaked out some positive returns on the week in the US, except the small caps. Asia was mostly down, led by China.

Here are some more highlights from last week from The Capital Spectator: 

* US employers dealing with highest labor costs in 20 years

* Petro states set to supply rising share of West’s fossil fuels

* German economy shrank 0.7% in Q4 while France’s economy rebounded

* Apple reports strong quarterly revenue gain as supply-chain crunch eases

* Jobless claims in US eased last week–first decrease in four weeks

* US pending home sales fell again in December amid shrinking inventory

* US durable goods orders fell in December — first decline in 3 months

* US economic growth accelerated in Q4 — faster than expected:

This week we hope the markets start the month off strong otherwise history tells us we’re in for a rough year. OPEC+ meets, which means we may see some volatility in Crude markets. It’s a big week for China, tomorrow is the Lunar New Year and Chinese markets are closed all week. Then to cap off the celebration, the Winter Olympics begin on Friday in Beijing.

Earnings Watch

Last Week

It was a decent week for the big names. Apple and Microsoft both had positive reports and showed strength off that. Mastercard didn’t see a pop initially, but ended the week up nicely. There were mostly beats on the bottom line as 79% beat the Street estimates, but it was a coin flip on how the stocks performed as only 46% ended the week higher.

This Week

Last week two from the trillion dollar club reported, and now the other two are up. Google, ok Alphabet, and Amazon are up next. Refinitiv has a nice positive predicted surprise for both names. Facebook, Meta Platforms, is reporting too, and they also have a positive predicted surprise. A name I’ll be watching is Regeneron (REGN), which has a -9.4% Predicted Surprise with some negative estimate momentum over the last month.

Best of the Week

Erik Townsend and Grant Williams discuss the frequency of financial markets. From Digital Currencies to NFTs by using technology to develop smarter markets. For example in equities, digital assets would remove much of the infrastructure of clearing and settlement. Brokers wouldn’t be needed to hold your certificates of ownership in street name, the network would automatically know who owned those shares and who owns them now.

What are Smarter Markets? Erik Townsend Host of Macrovoices - Listening time: 53 minutes

My personal thoughts are that we’re in the mid to late 90s of the digital assets timeline, when comparing it to the internet’s rise to prominence. Arca Labs and Coalition Greenwich conducted interviews with a large group of financial services professionals. The group was diverse across many roles. The study found what many have been talking about for a while. Blockchain and digital assets are becoming more and more of a focus. A couple of responses really caught my attention. The first was 33% very interested in investing in digital asset securities. Second was 86% think real-time settlement is the number one benefit and 77% of responders think it will be here in the next 5-10 years. This took me back to some of the things Erik discussed. This could be a game changer for the financial services industry and cause many issues for the old guard.

Arca Labs Study Finds 77% of Capital Market Participants Believe Traditional Securities will be Digitized in 5-10 Years

The Future of Securities: A Digital Asset Securities Study

Best of the Rest

My colleagues on our research team put together some stats around how stocks have already been in a correction and even a bear market. The indices, maybe not so much, because of the high fliers. We still see the big dogs holding the indices up. The S&P is kind of at the edge of a cliff holding on to the big tech names. Apple and Microsoft put up some very respectable quarters and they ended the week up about 7% each. However, when we look at the underlying names there’s a ton of trouble. The table below from the article compares global index constituent performance. The US Smallcaps are getting hammered.

Data Insight: A Turbulent Start to the Year for Global Equities | Lipper Alpha Insight | Refintiv

This one could change a few things. Coalition Greenwich summarizes the 654 page SEC proposal. Shane notes that this is “yet another shot across the bow for the crypto exchanges and fixed-income trading systems.” The article also notes that the SEC doesn’t care how big, small or limited the “security” is if it trades it needs to be on an exchange.

Expanding the Scope of “Exchange”—The SEC’s Latest Proposal

Insider buying is one of my favorite metrics when looking at whether to buy an individual company, but insider selling is a tough one to measure. There’s the saying that there are many reasons an insider might sell, but really only one to buy. That said these insider sales figures stand out quite a bit.

WHAT DO INSIDERS KNOW?

Dr. Pippa Malmgren joined Real Vision to discuss the escalations in Eastern Europe. Her point here is that it will not resemble traditional warfare, so it will be mostly ignored.

Hot War in Cold Places: How a Brewing U.S. - Russia Clash Could Impact Global Markets - Listening time: 34 minutes

I normally don’t like to share the same show two weeks in a row, unless there’s an exceptional desk. Joseph Wang is a former trader at the NY Fed Open Markets desk. He discusses how things work at the Fed and how QE and QT work.

Chasing Commas (guest: Joseph Wang) - Listening time: 92 minutes (till end of Joseph’s segment)

This is one I didn’t realize there were so few AAA rated companies in the United States. This article does a quick walk through of the narrowing of the companies making that grade. Apple was upgraded by Moody’s last month, but it looks as if S&P still has it as AA+. At Refinitiv, we have a quantitative rating model that puts Apple at AA. The Moody’s rank below of WR is the LT Issuer Rating, but you can see how this model breaks down the company’s rating into three categories and 12 sub-categories.

AAA Is for Apple

One for the Road

Wow! This one was powerful. I know I've heard Louisa before, but something about the way Jim is to lead her and challenge her statements to get her to go deeper. There are so many self improvement topics here. They touch on sleep, stress, and a bunch of other topics to help you succeed. Don't miss this one.

Louisa Nicola — Neuroscience for Your Physical & Financial Health - Listening time: 71 minutes

Thanks for reading. I'm hoping you have a wonderful week.

Michael