A Bit Of Air Leaks Out Of The Balloon
Equities start the day lower as a bit of air leaks out of the balloon. Look, we’re up like 10% since the day before Christmas and there’s more overhead resistance than my SAT scores so yea, a few down sessions are inevitable. There was quite a bit of news overnight from domestic U.S. concerns so let’s glance thru it quickly and see if we can spot any trends. A few retailers threw up on themselves after cutting forecasts and talking about a “December sales slowdown”. Macys tumbled the most in a decade after pre releasing, Kohls the same, and Nordstroms fell because the other two fell (how bad that does that suck?). Is the consumer dramatically slowing? Maybe, I assume bears will jump all over this to make the recession case. But if I wander thru the shopping aisles and look at other names they haven’t said anything similar (as of now, don’t even @ me). CROX, makers of plastic shoes with holes is near an all-time high. They even have a Post Malone version that sells for $300 on Ebay (I love this Spider Man Post Malone song btw). RH, makers of $2000 “reclaimed wood tables” (hey guys, we went to a collapsed barn in Dubuque and found some cool wood, buy our table and show it to your haughty friends), is up 6% this year and not that far from it’s all time high. LULU, makers of $100 pants my daughter suddenly loves (I’m screwed), is up 7% YTD. People aren’t going to Macy’s but they love $90 ABC pants? I don’t know, maybe there’s no coherent theme to a “consumer slowdown” yet, maybe it’s still bubbling like my wife’s tortilla soup and ready to burn the top of my mouth like every soup ever. I just don’t know. But you know what? That’s refreshing to say. I legit don’t know and no one else does either. What I’m looking for are clues to a consumer slowdown, something that would mimic this sideways move in Retail sales that preceded the past two recessions. Now maybe CROX, RH, and LULU aren’t the right places to look but I thought they’d make for interesting commentary. Anyway, let’s look at today’s price action.
After the open we saw a bit of early weakness but you know what? It got erased a little over an hour into the session. Curious? Hmmm…quite curious. With the retail carnage + a big bounce off the lows we had every reason to see the market sell off but it didn’t, it actually rallied all morning long. Now the sector makeup wasn’t exactly L’Oreal good but it wasn’t high school trashy makeup bad either (they don’t pay me, I had to buy some for my wife so it’s all I could come up with). Real Estate, Utils, and Staples were all near the top but Industrials managed to grab the silver medal so that’s somewhat comforting. However, and this is where the rant begins, Chairman Powell made a few comments around noon and this here market decided to act like a petulant child. My man actually said “we are on no preset path” which is EXACTLY what we need to hear from him but then he casually threw in that they want the balance sheet to be “more normal” and the market threw a tantrum. Pathetic…truly pathetic. WAAAH I don’t get cake plus candy after dinner? WAAH. Can we not be wholly reliant on the Fed doing nothing in perpetuity please? Winners: STZ, IP, GE, PKG, WRK, and NWL. Losers: M, LB, KSS, AAL, JWN, UAL, GPS. Hey…friend…follower…reader…are you ready for more distracted driver accidents because you’re gonna GET more distracted driver accidents. “I don’t know officer, one minute I was looking at the heart rate of some dude in the corner and the next thing I know I hit a pole”
The rest of the day saw us shrug off that tantrum and close near the highs! That’s 5 up days in a row for $SPX….are we back? So Bespoke took a look at big rallies off major lows and unfortunately for us couldn’t come up with any concrete good news. There were times when a bounce this big marked the low and times when it didn’t. If I had to guess what market prognosticators are expecting I’d lean towards “retest in the coming months” over “that was the low” but we’ll only know in hindsight and that’s what makes stock market investing so hard. Hey…did you know the Soprano’s debuted 20 years ago today? Old…so old…I bet there’s someone in your office who has no idea who Tony Soprano was and why the show ended on such a stupid song.
Final Score: Dow +50bps, S&P500 +44bps, Nasdaq +42bps, Rus2k +46bps
- Succinct Summation of the Day’s events: Church during the sermon, library at midnight, hiking thru the woods, whatever the opposite of having a newborn is quiet in the market right now. Felt like a holiday to be honest. A bit of Fedspeak with a mixed market reaction but the bounce hangs in there for now.
- A defense of…active mgmt? The reason why investors fail to achieve their financial goals is not by being in a high fee fund, but by timing the market. They get out when risk is apparent and get back in when the dust has settled. We know this is exactly backwards. Risk is most present when you don’t feel it. High fee funds might not beat their benchmark, but if you can stick with them you’ll be better off than the majority of investors that hop in and out based on how stocks did last month
- Is this the next catalyst? The biggest wild card ahead might be the ongoing trade war with China. SPX was at 2800 when President Trump wrote his Tariff Man tweet; the index fell 3% that day and 16% in the next 14 days. Meetings with China resume this week and will continue at Davos January 23-26. This impasse has hurt both countries and a resolution is now more likely. This alone has the potential to rocket the index another 10% higher (to 2800).
- America in a nutshell
- I absolutely love anachronisms and this list of “ways to meet a man” from 1938 cracks me up. They are so absurd… cry in a corner? Wear a band aid?
- Matt Levine cites a paper that basically says “PMs can be really good at picking stocks…horrible at selling them” We document a striking pattern: while the investors display clear skill in buying, their selling decisions underperform substantially. And the paper is so psychologically plausible. The job is about analyzing companies and deciding which to buy; the fun is in starting relationships, not ending them; the glory is in finding the best stock that you don’t own and buying it, not finding the worst stock that you do own and selling it.
- So an island that’s been around for a thousand years, home to a really mediocre World Cup soccer team and enough warm beer to kill half the US, one of the most technologically advanced sophisticated economies in the world might not be able to store fresh food if they leave some dumb international union? Really? I mean who cares, just eat those lovely bags of chips at the pub, I take down about 5 every time I’m in one, wash down that extra cold Guinness that’s only made for Americans.
- You think that house has internet? Feel like I’d get bored
- You think that island has internet? I mean how much can you fish and sled down that hill
We’ll end tonight with a breathtaking magic trick. This guy (and his wife) need to start at show in Vegas ASAP.
Have a good night