The Soft Landing Narrative And Its Critics, Argentina Elections, BBY Earnings
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We’re in a mini Goldilocks scenario. The soft landing is playing out – Alessio de Longis, Senior Portfolio Manager, Invesco
There’s too much reliance on a soft landing at this point. We need to be a little bit cautious – Victoria Fernandez, Chief Market Strategist, Crossmark Global Investments
Source: Both quotes from the WSJ article linked to below
There was a good article on the front page of today’s WSJ Exchange section about how the market is now pricing in a soft landing (“An Expected Soft Landing Fuels Stock Market Rally”). In the wake of the better-than-expected October CPI last Tuesday, the market is convinced – correctly IMO – the Fed is done hiking rates. Since inflation and the Fed’s rate hikes to counteract it have been the main source of pressure on stocks, this is a logical inference.
However, the contrary thesis – one that I subscribe to – is that all the Fed’s rate hikes have yet to make their full effects felt on the economy and markets to date. Those who hold this premise expect a recession in 2024.
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One area of the market where this debate is playing out is the Russell 2000 index of small-cap stocks. IWM surged 5.5% on big volume last Tuesday but is still struggling to clear its 200 DMA. Bulls expect this to be resolved to the upside and bears expect it to fail. I’m keeping a close watch.
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In other interesting news around the world, Argentina elected an eccentric Libertarian – Javier Milei – President over the weekend. Argentina is in an economic crisis with inflation over 100% and more than 40% of the population living in poverty. Milei wants to make the US dollar Argentina’s currency, end its central bank, and reduce a bloated state sector (“Firebrand Libertarian Elected In Argentina”. Milei named a couple of his dogs after the famous free-market economists Milton Friedman and Murray Rothbard. It is reminiscent of the Chicago Boys that came to power 50 years ago in Chile under Pinochet. The Argentina ETF (ARGT) is +12% on big volume today.
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In addition to Zoom (ZM) and Nvidia (NVDA) earnings Monday and Tuesday afternoon, respectively, consumer electronics giant Best Buy (BBY) reports earnings Tuesday morning. BBY has been mired in a nasty slump with six straight quarters of negative high single digit and low double digit same store sales. Home Depot (HD) and Target (TGT) – which tilt towards discretionary merchandise like BBY – both reported weak same stores sales last week and I see no reason why BBY should buck the trend. The stock is cheap at 11x EPS guidance for the current year but I have a small short position.
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More By This Author:
The Fed Is Done, Small Caps Eye Breakout, Nvidia Earnings, Value In Zoom
WMT: Buy The Dip, IWM Rejected At 200 DMA
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