Worry, Obesity and Interest rates

By Jeff Kelly on March 1, 2024

Parents worry. It’s what we do. Let me tell you we are really good at it. We’ve worried about our girls since the day they were born. And now we have been blessed with the most beautiful baby granddaughter ever. A treasure and a source of sheer delight.

Today, I’m more worried than ever about our daughters and granddaughter. I see what’s occurring around the country with the attempts (and some successful attempts) to limit or eliminate women’s access to healthcare. This is something I never thought I’d need to worry about in America, but here we are.  Legislatures around the country ignore hungry children, ignore the fentanyl issue, ignore the obesity issue but they are right there to get between a woman and her doctor.

It’s hard to ignore that many, many of the legislators are men. Many could use some of the new drugs offered by Eli Lilly and Novo-Nordisk. Perhaps the gym and some fruit and veggies could help them think better.

The worry is always most acute at night. I watch things on YouTube, and I can feel myself getting physically angry. I am aware this isn’t a prescription for good sleep. It is however what I signed up for when those girls were born. It’s not a time in our country to not be involved. Whatever your position, the time is now. Don’t sit back and then say woulda, coulda, shoulda, it could then be too late.

The equity markets, in contrast to me, have no worries. Also, in contrast to the past year, we’ve seen some weakness in several big cap tech names while the rest of the market moves higher. Broadening of the stocks participating is a great thing.

We’ve also seen equities in China start moving up after a terrible period. While we are very bullish on the next 9 months, the next few weeks give us pause. We have some magazine covers coming out that should get our attention. The folks at the Economist are great contrary indicators. The first cover below was February 2020. The second is this week.

Economist Cover February 20-28, 2020

Economist Cover Today

The other worry we see is interest rates.. In early January the markets were expecting 7 rate cuts in 2024. We are now down to expecting 2 rate cuts.

We think it could be zero. The data is strengthing, not weakening. The Fed will not cut rates after their July meeting due to the coming election. Despite the worst and most protracted bond declines in history (see the chart below), it may be December before  we see a cut. I don’t think the market is prepared for this occuring.

Then we have the upturn in oil. This is not welcome news for inflation or interest rates. We also see the cost of shipping freight reaccelerating with the actions of the Houthi rebels in the Red Sea.

We still see any declines as a chance to add to positions. The rally is long in the tooth and some caution is warrented both in the equity markets and the country.

CHARTS FROM THE WEEK PAST

A long way to go before it’s 1999.

Sure, it’s a healthy habit to keep your hands clean … as was the case before COVID-19 too.

But a shock changed that behavior. According to Statista, hand sanitizer sales in 2023 were 3x what they were in 2019 and forecasted to continue growing. You can’t walk 30 feet nowadays in a commercial setting without seeing hand sanitizer.

A very nice breakout for the XBI, biotech showing signs of life.

The inflation spike in 2022 was a 4 standard deviation event.

Very rare, therefore unlikely to repeat.

Now that inflation occurred, Wallstreet, just like the Fed, is laser focused on it.

A bit euphoric in the short term.

China has been in a terrible bear market.

Now it may be breaking out. So what happens, they close many China Funds. Can’t make this stuff up!

The equity risk premium is well below average.

This says stocks hold more risk than the have historically.

50% of S&P 500 is asset-light sectors today vs. <15% in 1980; Manufacturing is <20% of index today vs. 66% in 1980.

Capital Goods orders went up .1% vs. a revised -.6%.

Progress but not much. T revision was from an originally reported up .2%.

January durable goods orders (blue) -6.1% month/month vs. -5.0% est. & -0.3% prior (rev down from 0.0%); orders ex-transportation (orange) -0.3% vs. +0.2% est. & -0.1% prior (rev down from +0.5%).

February Consumer Confidence Index from the Conference Board falls to 106.7 vs. 115.0 est. & 110.9 in prior month (rev down from 114.8) … present situation down to 147.2 vs. 154.9 prior.

A move up in German Consumer confidence.

1^st one in a while.

Poor health subtracts 10% from U.S. GDP.

Sounds about right.

The S&P 500 performance is best when we have a Democratic President and Senate with a Republican House.  

No opinion, just fact.

Energy is entering a typically strong seasonal period.

Most portfolios are underweight small cap stocks.

They have begun to perform better lately.

We have started to see flows to small cap funds.

Buybacks announced are running well ahead of last year.

Risk appetite is extended.

U.S. Consumer is strong, Global manufacturing is weak according to ISM (Institute for Supply Management).

GDP has been solid since the lockdown ended.

25% of total office loans come due this year.

Something to keep an eye on.

Hedge funds are overweight tech.

We’ll see about those rate cuts….

WEEKEND HOMEWORK

Missouri passes a law telling pregnant women they can’t get divorced. Tell me again how they aren’t trying to control women. Talabanish.

Another crazy one in this story. Men should be allowed to rape women because the women wear shorts and men will be men. Seems to me those men should be in jail.

Look for some secondaries to be sold soon. Equity is now cheaper than debt.

A clothing company ion China submitted trademark applications for the name “Shohei Ohtani”. The company told Japanese media it was an “original” idea. They said they were unaware it was the name of one of the world’s most famous athletes.

Lots of books get published on February 27^th. Who knows why. A very good book about the tech economy and a look back from one of the premier tech writers of the past 30 years.

Part memoir, part history, Burn Book is a necessary chronicle of tech’s most powerful players. From “the queen of all media” (Walt Mossberg, Wall Street Journal), this is the inside story we’ve all been waiting for about modern Silicon Valley and the biggest boom in wealth creation in the history of the world.

When tech titans crowed that they would “move fast and break things,” Kara Swisher was moving faster and breaking news. While covering the explosion of the digital sector in the early 1990s, she developed a long track record of digging up and reporting the facts about this new world order. Her consistent scoops drove one CEO to accuse her of “listening in the heating ducts” and prompted Facebook’s Sheryl Sandberg to once observe: “It is a constant joke in the Valley when people write memos for them to say, ‘I hope Kara never sees this.’”

While still in college, Swisher got her start at The Washington Post, where she became one of the few people in journalism interested in covering the nascent Internet. She went on to work for The Wall Street Journal, joining with Walt Mossberg to start the groundbreaking D: All Things Digital conference, as well as pioneering tech news sites.

A good podcast with terrific discussions about potential rate cuts.

Erik Townsend and Patrick Ceresna welcome Jim Bianco to MacroVoices. Erik and Jim discuss:

• Inflation, Housing Market and Supply Chain Issues
• FED Rate Cuts and Market Complacency
• Interest Rates and Their Impact on The Stock Market
• Economic Data and its Impact on The US Dollar
• US Economy, Gold Prices and Fixed Income Investments

MacroVoices #417 Jim Bianco: FED Cuts, May, June or Bust?

Almost March Madness time. I’ll hear from Heather about those damn Kansas Jayhawks. After my Super Bowl loss, she was very kind. That won’t happen if the Jayhawks win it all. Have a terrific weekend and remember to get outside. Spring is coming soon. We need to get our beach bodies ready!