Market Outlook for the Week Ahead, or Reliving 1918
Boy I never thought I’d relive 1918 again. We get both a bull market AND a flu epidemic.
The extent of the plague out here in California is nothing less than of Biblical proportions. Whole school districts are shutting down, people aren’t showing up for meetings, and daily newsletters are arriving at half their normal length, or not at all.
Over 100 have died from the flu in the Golden State, but not me! I guess I’m just too mean to die. The virus just lands on me and shrivels away from neglect.
Some $33.2 billion poured into equity funds the previous week, an all-time high. Party while you can, for it’s the next generation that’s going to have to pay the bill.
The markets are increasingly resembling the final melt up of the Dotcom boom, and we all remember how that one turned out! Of the eight blowout Januaries that have occurred in stock market history, six went on to deliver 20% gains. One can only hope.
The US wants a weak dollar. No! It wants a strong dollar. Weak, strong, weak strong, help! Clearly the government is of two minds over the direction of the greenback, with the president and the Treasury secretary painting dueling scenarios.
The foreign exchange markets are voting with their feet, taking the dollar down 10% in a year. Foreign capital flight from the US in fear of coming political instability is clearly an issue, as is Chinese dumping of its once $1 trillion holdings of US paper. Emerging markets, small caps, and Boeing (BA) and Caterpillar (CAT) love it.
The last time the US pursued an openly weak US dollar policy was under Nixon. As you may recall, gold soared from $34 to $900 after Tricky Dick took the US off the gold standard.
Not all is perfect here in Silicon Valley, with Apple (AAPL) performing a 4% swan dive, triggering my first stop loss of 2018. It won’t be the last.
First, the European Community announced a $1.25 billion antitrust fine against Apple’s chip supplying partner, QUALCOM (QCOM). Then Apple got hit by a raft of analyst downgrades for second quarter iPhone sales.
The third nail in the coffin for this trade was a presidential comment that he favored a strong dollar. This has the unfortunate effect of immediately devaluing about half of Apple’s earnings and accounted for the $3 plunge we got on Thursday.
Still, better to dig out a small hole instead of a deep one. Never underestimate the stupidity of other investors, especially those who read the wrong newsletter.
Our first report of Q4 GDP came in at a moderate 2.6 %, with housing showing overwhelming the greatest rate of growth at 11.6%. Gotta love all those positive housing pieces I have been sending you for the last several years.
As for the Mad Hedge Fund Trader Alert Service, we keep grinding up from one new all-time high to the next. We are up 2.40% in January, with a trailing 12 month return of 53.49%. Our eight year profit stacks up to 278.87%.
I have been going pedal to the metal on the debt explosion theme, with a double short in Treasury bonds (TLT), double longs in gold (GLD), (NEM), and a long in commodities (FCX).
And since were are clearly bored here with loads of time on our hands to think up mischievous thoughts, we are rolling out our new Mad Hedge Technology Letter in the coming week to take up the slack.
This week will be all about jobs data, which roll out in rapid succession from Wednesday morning.
We are now into Q4 earnings season so those should be the dominant data points of the coming weeks.
On Monday, January 29, at 10:30 AM, the week kicks off with the December Chicago Dallas Fed Manufacturing Survey, a read on business conditions in the Lone Star State. Lockheed martin (LMT) reports earnings.
On Tuesday, January 30 the Fed’s Open Market Committee Meeting starts a two-day meeting. At 9:00 AM EST a new S&P 500 Case Shiller CoreLogic National Home Price Index is released. Advanced Micro Devices (AMD), Pfizer (PFE), and McDonald’s (MCD) report earnings.
On Wednesday, January 31, at 10:00 AM EST, we get the first of the big jobs numbers with the January ADP Employment Report. Boeing (BA) and Microsoft (MSFT) report earnings.
At 2:00 PM we get the Fed decision on interest rates. The outlier is for them to announce a surprise 25 basis point rise to heat off a superheating economy.
Thursday, January 25 leads with the 8:30 EST release of the Weekly Jobless Claims. At 9:45 AM we learn the PMI Manufacturing Index, a leading indicator of private sector business activity. The weekly EIA Petroleum Status Report is out at 11:00 AM EST. Alphabet (GOOGL) and Apple report earnings.
On Friday, January 26 at 8:30 AM the January Nonfarm Payroll Report it out.
Then at 1:00 PM, we receive the Baker-Hughes Rig Count, which has started going ballistic. ExxonMobile (XOM) reports earnings.
As for me, I'll be taking off for the Wynn Hotel in Las Vegas this weekend, where I understand a large number of rooms have suddenly become available.
But $7.5 million for a manicure? It sounds a little steep to me. I can get them at home for $15. I guess location is everything, and it depends who’s asking!
