Closing In On The Highs

Equities start the day higher as a mouseload of news hits the tape! I don’t normally do a Friday recap because 1) I feel like no one wants to read market content on Fridays and 2) after people drink one of the 4 Ms they just delete my email before opening it. BUT I’m inspired to write because one of my favorite companies, Disney, announced their streaming service last night! For $6.99 a month, less than the cost of a light beer in NYC, you are gonna get every Disney movie, plus the Simpsons, plus original content, plus much much more. Wait…Mr BullandBaird..coveter of all things fleece….did you say $6.99 a month because Netflix charges me $9 a month for one screen? Yep…begun the streaming price wars have (Disney will lose a projected $3.9 billion on streaming this year, and nearly $5 billion next year. A huge investment). I mean if you have kids is there any way on God’s green Earth you aren’t waiving this thing in? Please. It might be the final nail in the coffin for cable bundles, why would anyone still be using those? JPM reported last night and beat expectations. I’ve said it before but we need Financials to pull their weight here and the house of Dimon beating is a good start.  Finally, Chevron acquired Anadarko Petroleum boosting sentiment in the Energy space. This is a $33B deal and it’s refreshing to see because it makes me think animal spirits are still alive and well. Media, Financials, Energy, a slew of positive market catalysts this morning put futures just shy of their all-time highs. Let’s see if they close there.

After the open the S&P500 Total Return Index hit a new all-time high. That might be a hipster index (most people just default to the plain vanilla S&P500) but it’s real and it did break its old high. Disney soared 11.5%, JPM gained 4.6%, and APC rose 32% so all those events I mentioned earlier helped push the tape higher. Now look, I want you to remember something as we approach the old highs. All of this doesn’t mean things can’t go wrong, that we’re “in the clear” and the World is peachy. Things can always go wrong and when they do they shock everyone in the process. In fact, if we wanted to be honest with ourselves, long term returns in the stock market aren’t great when unemployment is this low. But news has been getting better at the margin in China and in Europe, the US economy continues to chug along, the Fed is friendly, and if earnings aren’t as bad as people think then we continue to climb the proverbial wall of worry. We want that wall…you NEED ME ON THAT WALL. By lunch were drifting around, but of the highs, 2,904 up 0.5%

***Im interrupting this recap for the NEW STAR WARS TRAILER. HYPE!!**** (my theory on the title here)

The rest of the day didn’t bring much new other than that trailer so let’s wrap up because no one wants to read 800 words on a Friday. We closed at 2,907, less than 1% away from a new record high. Earnings season is just getting started, we have a long way to go, so I won’t make any broad statements with only 29 S&P companies having reported (rare for me). I say this all the time but in the short term markets trade on better or worse and things have indeed been getting better. If that continues then maybe we rip thru these old highs and never look back. But optimism is rising, if you start to see fund flows turn sharply positive that could also be troubling. We don’t want to see euphoria break out that’s the worst case scenario right now. 

Hey…I’d be remiss if I didn’t mention Game of Thrones this Sunday! Can’t wait!! One of our unbelievably talented Client Specialists Kristin S shot me this link (shout out to your boy Tom too) that you NEED to catch up on. Hey Kristin and Tom…send me more links...you rock. 

News Highlights:

I only have one video tonight because it needs to stand alone. I hate when people get caught up in the nonsense that “things are hard right now, everything seems so bad, I’m worried about where things are going”. Look, there’s always a reason to worry, ALWAYS, but I think optimism needs to be your default setting. Humanity is an incredible thing; we’ve come so far in such a short period of time. Look at what we are doing right now. Look at this video and the one from last year. You live in extraordinary times and I want you to cherish it. The future is incredibly bright and I’m so happy to be alive at this moment in history talking with you. I can’t wait to see what happens next! 

Crying Over Spilled Fleeces

Equities start the day flat as I continue to grapple with what might be the biggest punch I’ve ever taken. My brand, my favorite thing to wear at my desk, my identity in the corporate world, Patagonia, has decided to shun me and my ilk. I spent the past few days wandering back alleys of my town, a single tear rolling down my cheek, after being cast out from the warm embrace of a “100% polyester fleece with sweater-knit face, fleece interior and heathered yarns.” Look, when the building you work in decides to keep the office roughly the same temperature as the polar region of Mars you have to do something to survive. I blow on my freezing cold hands more than a member of the 101st airborne did during the siege of Bastogne. Patagonia, like Mouton Rothschild and Reese’s, makes the best product on the planet. If it happens to have a Baird logo on it, even better. But whatever…FINE….FINE…you won’t make any more vests for financials services well guess what, I’ll still wear them!! You CANT STOP ME. Weekly Claims fell to the lowest level in 49 years, almost breaking 200k, and basically ruined every single Bears thesis that unemployment is about to rise. Hey, dear reader, take a look at this chart of Initial Weekly Claims and tell me what you see (h/t @calculatedrisk). See those dark gray bars, those are US recessions. Notice what rises into a recession? That’s right, weekly jobless claims. People lose their job, they file for unemployment, they stop buying things, and the economy slows.  That’s currently NOT happening. Things that make you go hmmmm. 

After the open, well, since I chose to write a blog the market went absolutely nowhere. In fact feel free to DM me on TWTR or something and ask if I’m writing.  If I am you may as well short vol (for those of you playing at home that just means betting on the market not moving. Sounds fancy though right? Wall St loves fancy terms). Actually, since we have a jobs report tomorrow I should’ve known we’d go nowhere fast.  Let’s see if there’s any names to talk about before moving on. TSLA fell 8% after missing delivery guidance while its CEO spent the day in a NY court room. Roku lost 6% because apparently the market just figured out AAPL and AMZN are competing against them. *Shrug* STZ had a good day though, gaining a thirst quenching 6% after reporting better than expected earnings. What’s your favorite Constellation Brands brand (heh)? I’ll say High West Whiskey, a good solid whiskey for Manhattans. Hey…have I ever told you my theory about the 4 Ms? There’s only 4 cocktails you ever need to order at any bar in the world and they all start with the letter M.  Any bar…city, country, beach, fancy, not fancy, etc. Can you figure the 4? Email me: mantonelli@rwbaird.com

The rest of the day was a pointless sideways grind and a close at 2,879 up 0.21%. So my partner Willie called this a “Ragged Rally” today. I love the term, love it, he used it to say that while we are near all-time highs there’s still parts of it that are rough around the edges. As we sat together talking it over it made sense to me. Look, we just spent 3 months wandering thru the woods worried about being eaten by a bear. When you emerge from the trees you aren’t exactly going to be looking pristine.  Your hair is a mess (small caps are lagging), you haven’t showered (economic data stinks), and let’s not even talk about your breadth (we need sectors other than Semis to start advancing.  Financials for example). But maybe, just maybe, the worst of your wandering is behind you and things will start to improve. 

Final Score:  Dow +0.6%, S&P500 +0.2%, Nasdaq flat, Rusk +0.4%

News Highlights:

We’ll end tonight with the first ever double back flip done on a Slack line. I can’t even.

https://www.youtube.com/watch?v=9aK4C2AdBgE

Have a good night

Doing The Impossible

Equities start the day slightly lower as we sit just 2% away from a new all-time high. No, this isn’t an April Fool’s joke, we legit sit roughly 2% away from a level that seemed impossible only a few months ago. Why did it seem impossible? Well, for one, when you get hit in the nose it’s hard to imagine things are going to be ok anytime soon. A 20% selloff in a month is like getting hit in the nose with an Aircraft Carrier. Second, economic data has seemed so lax. Whether it’s because Q1 always stinks or just a general global slowdown, it was hard to imagine approaching all-time highs with Europe practically in a recession. Finally, nothing seems to have been solved. Brexit still exists, the China Trade war still exists, earnings are still expected to be shaky, and there’s all kinds of divergences strategists are worried about (lack of momentum, Rus2k not back to its highs, Transports not back to its highs, etc). But as we know, markets climb a wall of worry. There is always something to fret about, heck people have been fretting about LYFT and what that might mean for the general state of the stock market (never mind that FB got cut in half after its debut). Look, I don’t know what the market is going to do next, no one does, maybe we hit new all-time highs in April, maybe we go sideways for months, maybe we selloff. But there will NEVER be an “all clear” bell, there will never be certainty, things will never seem calm. When Purdue lost on Sunday I was devastated but things will be ok, I will be back at my all-time highs soon even though I know it will be bumpy along the way. (my weight is already there…yeeehawww!!)

After the open one would’ve expected the market to experience some sort of weakness given we rallied over 1.25% yesterday but it never materialized. There was a very brief dip around 11am ET but most of the morning was basically flat. Why do I always end up writing on days when the market is flat? I suck. Durables goods were weak but we are still getting old data due to that oh so wonderful gov’t shutdown. This was a Feb number and I really enjoy when people draw big conclusions about where we are going from Jan / Feb data which always seems to be slow. Whoa hey what happened last year, we had a 20% selloff in stocks, the gov’t was shutdown, it was colder than Mars over most of the US, and the Fed was threatening to hike more than a 20 year old who dropped out of Berkeley. I’m shocked economic data slowed....SHOCKED. Whatever, I’m ranting, data does need to start picking up for my theory to be correct so we’ll see I guess. The market went nowhere this morning and that’s ok, it goes nowhere most days. Winners DAL, DOW, WYNN, and FB. Losers WBA, CVS, KR, HUM, and ABC. This song is awesome btw, if you don’t like Marshmello you should.  

The rest of the day was a lot more sideways and a close at exactly FLAT. ZZZZfest. I mentioned earlier that there are things strategists are worried about but there are things we like too. Breadth made a new recovery high (h/t my guy Willie D), so the number of stocks moving higher is expanding again. But here’s something that I think is still under the radar. Look at these two charts (h/t @ukarlewitz and BAML). People are still off sides, they have been pouring money into bonds and cash as worries about global growth consume them. So, as this market grinds higher more and more of them worry that they are wrong about their view and unwinding their “wrongness” could be a tailwind going forward…

Final Score: Dow -30bps, S&P500 flat, Nasdaq +25bps, Rus2k -18bps   

News Highlights:

Ok, look, I need to make a social commentary with my end link tonight. Do we really want to occupy that world because that’s the kind of thing you see when Lux Luthor is about to unleash the nerve gas or when machines conquer humanity and turn us into a giant Duracell. What is this maadddnnesss???

https://bit.ly/2U9CV2I   (this is also my favorite tweet on it today)

Have a good night

Growth Worries...They Are Evergreen

Equities start the day lower after a wild week where the market tossed its cookies, Purdue actually played well in a NCAA Tournament game (they never, ever play that well), and the US political world….you know what you’ll never read in this here market recap? Political commentary because A) It doesn’t interest me and B) my goal is to make learning about markets fun and politics is the antithesis of all that. Speaking of tossing cookies, has anyone ever ridden that “Harry Potter and The Forbidden Journey ride” at Universal Studios in FL? I was there for an event and tried to ride it 3 times in a row. One could describe such a thing as “foolhardy” but that would be an understatement. I’m quite certain that jumping in a clothes dryer would give you less motion sickness. Anyway, we’re back to worrying about global growth so YAY! I love worrying about global growth, it’s as evergreen as me getting Auntie Annie’s in an airport concourse. Europe has negative yields, banks are getting crushed, our yield curve inverted (like me on that ride) and stocks have all of a sudden got a case of the jitters. You know what hasn’t gone haywire though? Credit…which strikes me as odd. Take a look at the IBOX High Yield Credit index. If we’re so worried about a recession and an imminent bear market why haven’t riskier credits shown any signs of concern? Ari Wald (via JB) talked a bit about it here and I’m inclined to agree with his conclusion. It’s a slowdown worry not a recession worry (for now). Right now we do not believe an imminent recession is likely in the US but that doesn’t mean growth expectations aren’t currently being reset. 2600-2800…the range persists.

After the open we got a whole lot of sideways and not much of a bounce from Friday. Small caps did well, as did Consumer Disc and Industrials, but the overall market really couldn’t get going in the right direction for very long. We briefly touched green around Europe’s close but by the afternoon we had given that up to trade 2,792 down -.30%. Apple had an event where they introduced a whole slew of new subscription services like Arcade, News+, and TV+ (I am definitely going to launch BullandBaird+). To make sure it looks as good on the big screen as it does on your phone all their new content will be viewed thru the same maze of cracks you have when you dropped your phone. How amazing is that? What a company. Seriously though, I have 10+ subscriptions right now between all the services I use. Ugh, the absolute last thing I needed was another monthly bill. Actually, does anyone wanna start a company with me that manages the insane amount of subscriptions people are going to have in the future? We’ll call it SubHub.

The rest of the day involved watching bond yields slip lower and wondering why..why do they keep dropping? What are bonds thinking? Look, no one knows where the market is going and no one knows when the next recession will happen. Yield Curves and New Home Sales and Unemployment and all the other fancy economic indicators are just pieces to a puzzle that no one can put together in real time. That being said, take a look at the Chicago Fed National Conditions Index which is at near lifetime lows (basically measures how easy / hard it is to get money). If a recession is close its going to have to come at a time when “financial stress” isn’t even a thing in credit markets. Doesn’t that seem peculiar to you? 

Final Score: Dow +6bps, S&P500 -8bps, Nasdaq -7bps, Rus2k +46bps (best news of the day I guess)

News Highlights:

So I actually found a final link with a Harry Potter theme!! Do you know how hard it is to find a short video that links my first paragraph to an end video? It’s hard….harder than writing about finance…

https://www.youtube.com/watch?v=6EPYkPnbLvA&feature=youtu.be

Have a good night

Welcome Newbies

Equities start the day higher as we once again trade back to the top of the range. Let’s circle back to the market in a second, I wanted to welcome all my new subscribers and tweeps because it’s been a heck of a run lately. This blog has grown to about 3,000 subs and my Twitter account is now the largest account at Baird! Let’s go baby!! Thanks for being part of my mission to make markets fun and interesting to read about. That being said, if you want off this email just hit reply and type “unsubscribe” and I’ll remove you while crying into my pillow. Anyway, enough of that, a huge rally yesterday took us back to the top of The Range and I wanted to point out two things. 1) Sentiment (as measured by the NDR Trading composite) fell back to neutral after a tiny selloff. Hmmm. 2) People continue to flee the market like it’s being flown on a 737 Max 8. Huge outflows are an underrated story of late 2018, early 2019. So check this: a VERY small selloff (roughly 2.5%) caused sentiment to drop alongside a backdrop of constant outflows. It seems to me that “bullishness” isn’t all that deep seated is it? There are some very jittery people trading right now and I think it’s safe to say that this is NOT a “loved market”. So with that backdrop our team continues to believe that the 2nd half will be better than the first and even if we grind this range for a while that’s not a bad thing.

After the open we spent a good amount of time grinding back towards 2,800 but most of our time talking about two stories. Boeing’s continuing dilemma with the Max 8 (not fun to blog about) and rich people bribing college official to get their kids into school (fun to blog about). Are you kidding me? You paid $500k to get your daughter into USC by pretending she rows crew? Absolutely ridiculous and worthy of relentless scorn. Look, let’s set aside the toxic ramifications of “advantage begetting advantage” which destroys social mobility in a society and focus on the fact that once you show that you are competent at what you do NO ONE CARES where you went to school. Talent is talent, it doesn’t take a “prestigious college” (whatever that even means) to be incredibly successful in life. Sigh….college is easily the worst bubble we have in every sense of the word. Our children shouldn’t have to endure crushing debt and a corrupt system just to say they went to XYZ University. It’s a complete farce. Education is important and a worthy goal to attain but the rat race of prestige is out of control. You know what? If you put that $500k into an S&P500 fund when you child hit 18 and that fund returned the long term average for stocks (~9%) little Johnny or Jane would have $5.1mm by age 45. I’m angry, I’m on tilt. I need to move on.

I spent most of the afternoon in a meeting with my new peers in PWM where they told me the IMO was working well with our Branch CSs and the CTAP was on schedule to be integrated into our toolkit so yea, group meetings in Baird’s Private Wealth Division is like living inside an episode of The Office. We closed at 2,791 0.3% which is still shy of that magic 2,800. Let’s go back to my “range” chart quickly. We’ve been in 2,600 – 2,800 for over a year now with only 3 deviations. 1 and 2 are all about “yay, things are great, we’re growing and people are buying homes because they’re confident about their jobs and the economy” while 3 was about “holy cow the entire World just hit a wall and we might just slip into the abyss.” Both the upside and the downside seem wrong with the current state of the World so I guess the range makes sense.  Home, Home on the range. 

Final Score:  Dow -34bps, S&P500 +31bps, Nasdaq +44bps, Rus2k +6bps.  

News Highlights:

We’ll end tonight with a fantastic magic trick that I still haven’t been able to figure out. Amazing

https://vimeo.com/32319179

Have a good night