First Move, Wrong Move?

Well, just when I thought I was done with the article of the week, Chair Powell hosted the Fed Presser and made things interesting!I’ve been doing this for a while and have come out several times after Fed meetings saying, “the first move is often the wrong move.”I think it may apply once again, but could take a few days to play out.

This afternoon felt like either a fund blew up or the margin clerks were taking a bunch of dumb over-leveraged money out to the woodshed to put them out of their misery.We used the opportunity to top up positions across the board – end of day and after-hours.That is not to say we got the last tick – as I’m sure we will see some retail selling in the morning as well – but in the selective spots we bought, the margin of safety is so large, that the downside is limited.I live for days like this.

I do not think this is a December 2018 “auto-pilot” moment -as we have been saying on the podcast not to expect more than 1-2 cuts in 2025.Today the Fed confirmed it with their dot plot and SEP.If you’re wondering what drove the markets crazy, it was this little green circle:

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They effectively took 2 cuts off the table for 2025. The neutral rate is estimated at ~3.5% (level at which Fed is neither restrictive or accomodative).This implies the Fed will remain somewhat restrictive in 2025, but does not guarantee it.It was not surprising to us, but apparently it was to those who are levered long in MOMO stocks and shiny objects.

So when the fundamentals are irrelevant due to structural forced selling, I look to some technicals to see when the bleeding might begin to coagulate.I found a number of indications that we could be nearing that point and others that were mixed – leading me to think it could be couple day event but not a couple week event.Hence accepting imperfection and beginning to take advantage of opportunity where it makes amazing sense in the intermediate and long term.Here’s some of what I’m paying attention to at the moment:

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Many of these are stretched to or near levels from which you would normally see a bounce back.

Key Market Outlook(s) and Pick(s)

Given my thoughts above, nothing changes in outlook from each of these different interviews:

On Friday, I joined Stuart Varney on Fox Business to discuss Corporate Tax cuts, stock correlations, VF Corp and Paypal.Thanks to Stuart, Christian Dagger and Preston Mizell for having me on.

On Monday, I joined Kristen Scholer on NYSE TV to discuss markets, fed, picks and more.Thanks to Kristen, Jeff Cohen and Melissa Montanez for having me on.

Here were my notes ahead of the segment:

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Also on Monday, I joined Sean Callebs on CGTN America to discuss tariffs, US/China (Trump/Xi) relations and more.Thanks to Sean and Kamelia Kilawan for having me on:

On Tuesday, I joined Stuart Varney on Fox Business to discuss Retail/Auto Sales and holding Etsy.Thanks to Stuart, Christian Dagger and Preston Mizell for having me on:

On Wednesday I joined Neil Cavuto on Fox Business to discuss Fed, rotation, Healthcare and more.Thanks to Neil and Jenna DeThomasis for having me on:

Here were my notes ahead for the segment:

Why Healthcare is NOT Dead!

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Why Baxter (BAX) is NOT Dead!

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10 key points from the November 8 Baxter International Earnings Call:

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2 things you want to see in a turnaround are currently present:

1) Improving balance sheet (solvency risk off the table) through asset sales.

2) Free Cash Flow positive (gives runway for operating improvements to take hold).

Bank of America Fund Manager Survey Update

On Tuesday, we put out a summary of the monthly Bank of America “Global Fund Manager Survey.” This month they surveyed institutional managers with ~$450B AUM:

Here were the key points:

1) Most bullish catalyst for 2025 could be “China Growth Accelerates” –

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2) No one wants Healthcare, Materials, Energy.Opportunities to be had:

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3) Some love for small caps and China starting in 2025:

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4) Macro outlook solid, but room to improve:

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5) Profit expectations improving, but not extreme:

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Cooper Standard Update

Perfectly on track. Nothing more to add…

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General Market

The CNN “Fear and Greed” collapsed from 52 last week to 34 this week.You can learn how this indicator is calculated and how it works here: (Video Explanation)

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The NAAIM (National Association of Active Investment Managers Index) (Video Explanation) jumped to 99.24% this week from 85.49% equity exposure last week.

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