Market Briefing For Monday,March 25, 2024

Quarter's End is nearly upon us; the Fed Chairman's candor drained lots of the questions about monetary policy; and the domestic growth profile says a trend to meaningfully lower interest rates isn't necessary or essential; but in an Election Year and moaning by a majority of the population; they will..a bit.

The overall market is due for a rest; although there aren't so many indicators technically proclaiming great risk, even as superficial ones are very extended of course. The 1st Quarter which began with stumbles, recovered as least as well as we suspected; and few of the 'macro' problems are resolved; some of them are really not yet addressed in a candid way (migration). So Congress takes 'another' two-week recess; and it's certainly not a reward for hard work. Of course they sidelined 'actual' issues; not just Border or Social Security. At the same time they found time to question Tesla or Apple; the techno theme. (I got a kick out of Elon Musk called Elizabeth Warren 'Senator Karen'.)

So basically the Fed sounded pretty dovish; they're laser-focused on monthly or interim data, and (smoke & mirrors) tend to tell the Nation to ignore 'Core' inflation (food and fuel); because of course keeping 'core' central' messes-up their illusion of lower prices. Households feel the strain of higher prices; we're assuming most families feel the impact on their budgets, and the Fed tries to say they're delivering, when actually they're not. Most reduced price increase upside rates of pace are derived from slippage of the post-Covid spikes; not a result of any real decline in prices. That's illusory; just prices at slower pace of increase, and the entire Nation adjusting to another level of diminished US Dollar buying power; a stair-step scenario going on for decades at this point.

As to Musk, he'll find (so will BVD) the trend towards putting tariffs on imports of Chinese EV's, probably including those made in Mexico or imported from China 'to' Mexico for transshipping to the U.S., as an effort to avoid the tariffs. We'll see about that; for now Mexico is booming and relations might require a softer approach in that regard; as the U.S. should want better paying jobs for Mexican nationals 'in' Mexico; which might even attract Central Americans. In this regard, the border issues remain interesting; as it's not normal immigrant demographics that are primarily being encountered, so that's a real concern.

Bottom-line: end of Quarter activity coming up; but not necessarily stronger, given all that has preceded, especially for S&P. There's not much new just for now; Congress took-off, and stocks moved little. Market ideally will stabilize in the approach to Easter, and we'll see thereafter.

By the way; at presstime, ISIS claims 'responsibility' for the horrific attack on a theater in the Moscow suburbs. It's not that Russia isn't culpable for lots of things; but this wasn't related to Ukraine and is yet-another Islamic attack.


Market X-ray: sentiment is cautious because the S&P 'discounted' the Fed's more friendly forthcoming stance far in-advance. That caused the bifurcated market with the majority trailing the Index, even as breadth improved (and is about all that's holding up the S&P for the moment).

It's the 1st Quarter's end this coming week, and we'll likely continue a mixed environment of some managers wanting to show more cash-on-hand; at the same time some will want to have under-priced and presumably undervalued small-caps a bit more represented going into the 2nd Quarter.

But none of that precludes a correction; even as small-caps typically are a bit emblematic of this divergence that persists in the market for months.

Corrections tend to happen when nobody is particularly positioned for one. In this case I expect one; but not beyond modest barring an existential shock. It is notable that nothing 'yet' tells the market to beware, but there's a sense not of foreboding, but of some sort of interim setback being ushered-in soon.

Ironically that may apply (the idea of retreat) being more significant for S&P mega-cap leadership, than to speculative small situations; but investors and traders especially, can become jittery so it's hard to assess the risk profile of a correction. I doubt we'll get even a 10% correction if the backdrop remains more or less the same, and might even skirt it if we got a Ukraine ceasefire; a development that does not seem imminent. Even one in Gaza is more likely.

Timing a setback is almost irrelevant for most investors or fund managers; as they'll not sell their core holdings, but more likely just retract buying impulses, at least for the shorter-term. They also have a feeling that headwinds may be prevalent as we get closer to Elections; but we're not quite at that point and it isn't likely to be a dramatic pivot, just more of a trading rang aspect for S&P.

As to a couple analysts talking of a 50% rise in the Russell; sure hope that's right, as would help some speculative stocks immensely. Especially those of the newer innovative or disruptive manner (also helped by low interest rates). One analyst noted such a RUT recovery would be long-term mean-reversion.


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This is an excerpt from Gene Inger's Daily Briefing, which typically includes one or two videos as well as more charts and analyses. You can follow Gene on Twitter  more

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