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Fitting summary of S&P 500 rally – we‘ve seen one of the largest 2y yields daily declines on slowing wage inflation. ISM Services PMIs also added to the Fed hawkishness reappraisal. Squeezing the bears, credit markets were confirming with a risk-on turn likewise.
Daily market breadth was really good, and spells that the move isn‘t over in the least. It progressed fast on the double punch – NFPs not coming in too hot, and real economy slowdown. Where does that leave us? With more prospects for LEIs moving lower, real estate declines, earnings downgrades and ultimately unemployment increase.
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Q4 2022 hedge fund letters, conferences and moreDG Value Slumps -23.4% In 2022 But Sees Room For Optimism And Opportunities In 2023Dov Gertzulin’s DG Capital struggled last year. The firm’s flagship strategy, DG Value Partners, returned -2.6% net in the month of December and -23.4% net in 2022 overall, according to a copy of the firm’s December investor update that ValueWalk has been able to review. Meanwhile, the concentrated class of the strategy returned -35.2% in Read More
All in the name of fighting inflation, after the transitory debacle I called Apr 2021 vocally. Now, the Fed is to keep tightening into a slowing economy (and ready to overdo it), and its targets of CPI below 5% in 2023 and at 2.5% in 2024, are too rosy.
Apart from the shape of the recession, and how well it would be cushioned by the U.S. consumer (look at confidence, expectations, retail sales, deliquencies etc), the key questions are just how far the Fed would take the Fed funds rate, and how long it wishes to keep it at its own evolving definition of a restrictive level.
We‘re in for a great year in precious metals, base metals, and neither agrifoods, nor energy (oil with its latest summer spike to $100 roughly) would disappoint. At least in the first half of the year, Treasuries are likely to do well – but otherwise 60/40 and passive investing are as dead as a dodo bird.
To get a feel for what premium subscribers get all too regularly, I‘m opening today‘s chart sections to everyone (except the position details that remain premium).
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Let‘s move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 and Nasdaq Outlook
Let‘s go and keep defending the lower border of 3,895 – 3,910 zone. 3,875 would be the following logical support. Next stop once stocks repel the profit takers, is 3,955. Keep in mind that SPX is running on a Fed tightening misperception – the central bank isn‘t backing off, and recession isn‘t bullish.
Bonds are doing fine, and the retreat is amply translated to the USD downswing. That was enough for a broad stock market rally support.
Gold, Silver and Miners
Silver was a little in gold‘s shadow Friday, relatively speaking – but the white metal will catch more fire as it builds energy for a fresh upleg. Note how well miners confirm, and keep confirming.
Crude oil‘s time will come later this year, close to summer – for now, this is a laggard of 2023 that makes sense to be in only as part of a real assets portfolio (no change since my late autumn words). Oil stocks can be counted on, though.
Copper is a bright spot, showing the way for commodities in 2023 – more appreciation to come across the board. You remember how bullishly I had been covering nickel, cobalt and lithium (EV essential metals) too.
Bitcoin and Ethereum
No more reasoning required as to why I‘m not talking Bitcoin and Ethereum…
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