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Markets Confused as to the Next Move

Down–then up–today the equity markets are bouncing somewhat, while interest rates hold stead in the 4.51% area. Day to day we get economic data that is creating cross currents in the debate as to whether the economy is slowing or not. Some folks have commented that with student loan repayments restarting in a week or two that GDP is going to take a drubbing–while I keep seeing that there are going to be many workarounds to paying your debt. Employment has remained strong–yet we seem to have more and more strikes taking place which can’t be helpful to the overall economy–not to mention potentially inflationary. What is one to do?

Well we have earnings season starting up in the next week or so–although many of the community and regional banks won’t be reporting until the end of October or early November. I am most curious of the level of write downs in commercial real estate–this is still the talk and certainly they will be higher than a year ago–but will they be a disaster? Commercial write downs will be with us for a couple more years so it is likely there will be overhang on the bankers for this same period of time – like many things the speed of the write downs will determine the health of the smaller banks–if write downs trickle in they will be manageable, but if they come in 1 fell swoop I think we will lose a bank or two along the way. We’ll see.

No reason to even ponder any action today – just sit back and enjoy the show. Review your holdings and consider the near future–i.e. I have a number of either of treasuries or CDs maturing on the 30th–where will the money be reinvested?

11 thoughts on “Markets Confused as to the Next Move”

  1. IMHO, an odd market today. One I don’t understand. SQFT is % up twice what O is % down. Next Era Energy NEE is the latest drive by shooting victim, selling off 6% for no apparent reason. Hard to believe a solid ute is off 25% YTD. It is rated a buy by 8 out of 10 analysts. Skinny 2.8% annual yield and a 6% principal loss in a day. That is the case for T-bills and CDs.

    Right now, oil is up more than it should be, ~$3.20. (Not that I know anything.) Generally when the articles come out about 100, 110, 120 oil, it is the sign of a top. On the other hand, oil stocks seem to be lagging this crude rally. Crude up 17.4% this month, XLE up only 3.7%. And could somebody please remind “Little Brother” natural gas it is still a fossil fuel, even if its been dating around with the greens?

    1. NEE may be down because NEP (child, an MLP that issues 1099) lowered distribution growth outlook

      1. NEE was a darling of WS. Firms were gaga over their green energy plans. Opppssssss, now they have said no growth for near and mid term.

        Most all utilities are getting pounded here. And with WS bullish on the sector this is real egg on their faces. I checked a bunch today’s heir charts were breaking out to the downside!

        1. NEE might very well be setting things up to buy NEP for cheap. Long term it could be a big ?win? for NEE… which by the way gave this guidance in July:

          “NextEra (NEE) reiterated guidance for FY 2023 adjusted EPS of $2.98-$3.13, in line with $3.11 analyst consensus estimate, and FY 2024 adjusted EPS of $3.23-$3.43, also continuing to expect to grow dividends per share at a ~10% annual rate through at least 2024 off a 2022 base.”

          As someone on SA mentioned.. didn’t MLPs go through this same exact situation several years ago?

  2. Yes, higher long term rates to uninvert the yield curve. Then maybe a small cut to “cardiac thump” the dead economy.

    Factors for higher rates long term:

    Oil up 3 to 4 percent per day can’t cause inflation. Right? Right? Nothing to worry about though, oil is on it’s way out. We’re all gonna be “electrified”.
    Higher energy costs and bad energy policies = inflation. Inflation = higher long term rates.

    Uncle sugar likes to spend, spend , spend. Interest on the projected 50 trillion plus debt load does not help either.

  3. Definitely some confusing moves in the income space yesterday and today.

    ALL+B (callable now at $25) traded to $26.28 this morning; goes ex-div tomorrow with a $.558/share dividend. Chart looks like a tech stock after a very favorable earnings report.

    GS+K now at $25.80 with a big move to the upside. Callable at $25 on 5/10/24 or it starts floating. Goldman will almost certainly redeem this issue next May – just like they recently redeemed GS+J.

    NI+B big move over $25, etc.

    It seems an algorithm or momentum trading outfit may have decided that they quickly wanted exposure to preferreds with floating rate dividends or ones that may eventually float.

    Or was this related to some end of quarter index rebalancing?

    I own all three and have been taking some profits, especially in ALL+B which now has the 4th quarter dividend already fully priced in (and then some). Not much value in any of these names at these prices now with de-minimus yields to call.

      1. I dumped 2k on em at 26.25. Love the issue but sold into spike. Goes exD tomm will see what it does after it settles down post exD.

  4. I do not think any single item moves the needle. It is the cumulative impact (if all happen) that may move the needle.

    One poster suggested that the yield curve may normaize with longer term rates going higher. Could happen. Do not believe that the market has baked this in yet.

    1. Fed needs to cut so the uninversion is not so materially high. without cut on short end we are potentially look at 6%+ long term rates.

      1. Typically it works the opposite way. When short end gets cut during elevated inflation risk, the long end rises higher. As investors are not willing to risk long duration exposed capital to higher inflation eating it away.

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