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| TAOST Wrap Week Ended Friday 24 January 2020 |
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Just think... "I have self-doubt. I have insecurity. I have fear of failure. I have nights when I show up at the arena and I'm like, 'My back hurts, my feet hurt, my knees hurt. I don't have it. I just want to chill.' We all have self-doubt. You don't deny it, but you also don't capitulate to it. You embrace it."
-- Kobe Bryant
RIP |
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Greetings Traders:
As I compile this week's recap the world continues to digest the news of the deaths of Kobe Bryant, his 13 year old daughter Gigi and a number of other folks in a helicopter crash today. My thoughts go out to his wife and family and to the families of all the other individuals that were on that helicopter this morning.
In terms of business... I'm changing the format of the wrap a bit... Let me know your thoughts.
Update: Monday 9:00am EST -- As you may have guessed, I generally put most of this wrap together on Sunday nights finishing on Monday morning. While most of my thoughts and comments this week remain true, do note that global equity markets have collapsed by more than 1% overnight. |
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In Sum
It’s hard to believe that next week marks the end of the first month in 2020. How quickly time flies. In a year where the markets have started out with strong momentum on the back of strong earnings, supremely accommodative central bank policies, a trade "deal" with China and optimistic economic outlooks, this week's news over the coronavirus outbreak managed to overshadow all that as the markets turned lower to end the week in negative territory.
S&P 500 -1%, Nasdaq -1% DJIA -0.8%
News on Friday from the Center for Disease Control confirmed a second U.S. case of the virus as the death toll rose to 26 people. Chinese officials warned that the virus is growing more contagious and expect experts to confirm roughly 1,000 suspected infection cases on top of the 2,000 diagnosed so far.
On the economic front, the IMF released its World Economic Outlook looking for the global economy to rebound modestly in 2020 (following a year in which it experienced the weakest growth since the financial crisis). Global gross domestic product will expand by 3.3% in 2020, up from 2.9% in 2019. The improved outlook is driven by a combination of aggressive monetary policy easing in 2019 and a softening in America's nearly two-year trade war with China. However, it did acknowledge that many countries are facing some of the same challenges they experienced in 2019: slow growth, central banks stymied by low inflation, high government debt and political instability.
The World Economic Forum in Davos provided a number of headlines this week as well. 45 spoke about how the U.S. is in the midst of an economic boom (shocking) and announced that the country would join a WEF initiative to restore a trillion trees by 2050. Climate change, global economic outlook and reassessing geopolitical risks were all major topics discussed during the week. European Central Bank President Christine Lagarde used the center stage to provide her inaugural strategy review She signaled that the ECB would leave negative interest rates in place for some time - suggesting that despite its misgivings, the bank was not ready to follow Sweden’s lead in returning interest rates to zero (at least not until the Eurozone’s inflation “robustly” meets the central bank’s target of just below 2%).
Next week, the tech sector steps into the spotlight with Apple, Microsoft, Facebook and Amazon all due to report earnings. Tesla will also report and potentially deliver some news on the Model Y along with its 2020 guidance. And on Wednesday, the Federal Reserve will announce its latest policy decision - economists are expecting no change to interest rates. |
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| The S&P500 suffered a modest pullback last week due, at least in part to the Coronavirus fact and rumor mill...
Update: Monday morning -- global markets cracked overnight and indices are down around 1.5% at the moment [8:53am EST]. |
| | CNN Investor Sentiment [Fear & Greed Index] |
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- More than one-fifth of the world’s population could have access to digital money issued by central banks to pay for groceries, movie tickets and even homes in the next few years. One in 10 central banks surveyed in 2019 said it was likely to offer digital currencies within the next three years, covering about 20% of the world’s population, according to a report from the Bank for International Settlements. The rising popularity of electronic payments, and the boom in private cryptocurrencies like bitcoin, has prompted authorities to pay more attention to digital currencies.
- Presidential candidate Michael Bloomberg outlined a plan to expand the accessibility of electric vehicles. As a part of Bloomberg’s plan to slash greenhouse gas emissions, he is proposing all new U.S. vehicles to be electric by 2035, along with proposed reductions of diesel pollution through the adoption of electrified trucks and buses and improved access to public transit.
- 45's threat of sanctions against France is on hold for now, after the countries agreed to extend talks on the issue of digital taxation until next year. That means no French 3% levy on Big Tech revenues, and no counterstrike from the U.S. (a move that would have elicited a collective response from the EU).
- As of last September, Chinese banks were sitting on at least 6.18 trillion yuan ($899 billion) in shaky debt - nonperforming or at risk of default.
- New overseas investment by businesses around the world fell for the fourth-straight year in 2019, pointing to a slowdown in globalization as the world-wide economy cooled.
- China is moving to cut the use of disposable plastics with bans on non-degradable plastic bags in major cities' shopping malls, supermarkets and food-delivery services. Analysts see the development as China catching up with the policies of the EU, Africa and Southeast Asia.
- Jeff Bezos's phone was allegedly hacked by Saudi Crown Prince Mohammed bin Salman a couple years back, according to a digital forensic analysis that found evidence of spyware being implanted via a video file sent to the Amazon boss from MBS's personal WhatsApp account. All this preceded the Saudi killing of Jamal Khashoggi, a journalist for Bezos's Washington Post—and the subsequent release of messages that exposed Bezos's extramarital relationship with Lauren Sanchez.
- The deadly virus in China has been described in detail for the first time. The new virus, dubbed nCoV-2019, is in the same family as SARS—a coronavirus that caused global mayhem starting in 2003—and even uses the same receptor to hack into a person’s lung cells, the team from the Wuhan Institute for Virology found.
- GPS signals have become unreliable in the last couple years and, as Fortune's Katherine Dunn reports, the shipping industry is deeply concerned. Interference with the signals takes place for a variety of reasons, such as geopolitical conflict and crime, and the consequences are becoming more severe due to the proliferation of offshore infrastructure such as wind farms and undersea cables.
- Fair Isaac, creator of FICO credit scores, is making changes. It will soon start scoring consumers with rising debt levels and those who fall behind on loan payments more harshly. It will also flag certain consumers who sign up for personal loans. The changes in how the most widely used credit score in the U.S. is calculated will likely make it harder for many Americans to get loans.
- The share of American workers in labor unions fell to a fresh record low last year. The fall in union membership reflects both the declining power of organized labor in the U.S. and slower employment growth in traditionally more unionized industries, such as manufacturing, transportation and utilities, compared with health care and other services. Economists point to the decline as a reason why wage growth has been relatively soft in recent years despite low unemployment and steady hiring. Median weekly pay for full-time union members was $1,095 last year versus $892 for nonmembers.
- Seeking to curb the sale of imported counterfeit goods online, 45's administration is warning of greater scrutiny and penalties. An initiative led by U.S. Customs and Border Protection and the White House aims to pressure e-commerce giants including Amazon—whose platform increasingly hosts lucrative third-party sales—as well as financial firms, logistics services and other companies positioned to help stem the rise in counterfeits and pirated goods.
- U.K. to leave the European Union. Britain's fraught and much delayed departure from the EU is scheduled to happen Friday. A transition period will kick in while the two sides negotiate new deals to cover their future relationship, meaning that in practical terms, not much will change for now.
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TNX - 10 Year Note Interest Rate |
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Interest rates appear to be headed lower in the U.S. again which is likely to lead equity markets higher.
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GLD - Gold Trust Gold Shares |
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Gold is breaking out which is a bit odd with equity markets still driving higher.
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Bitcoin looks to be taking a breather at the down trend line. Unless price reverses outright, expect price to continue moving higher.
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JNK - High Yield [Junk] Bond ETF |
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The overall weekly pattern still looks negative, but market participants continue to creep out on the risk curve as suggested by the rising price of JNK.
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BRN - Brent Crude Oil Futures |
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Crude is consolidating near resistance which normally leads to a break in 1 direction or the other... Here I suspect that will be to the upside.
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VIX - S&P 500 Volatility Index |
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Volatility remains low which allows price to continue its rise.Update: If stocks fall as global indices and the futures suggest, expect the VIX to spike today [Monday]. |
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Below you'll find stock news and the associated charts. |
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British firm Vodafone has pulled out of the Libra Association [Facebook], raising further doubt that the digital currency will get off the ground this year as planned.
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Wells Fargo’s former CEO was barred from the banking industry and fined $17.5 million. The stock is still higher than I think it should be all things considered.
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Electric vehicle sales are expected to grow in the U.S. to 934K units by mid-decade, but Tesla will be the beneficiary of most of those sales. By 2025, automotive analyst LMC Automotive sees Tesla offering seven different models, which will account for a quarter of all EV sales in the U.S.
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Brazilian prosecutors charged the former CEO of Vale and 15 others with homicide for the deaths of 270 people in last year’s collapse of its dam in Brumadinho.
Stock's pattern looks bullish nonetheless. |
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Cruise Automation showed off its “Origin” autonomous vehicle this week, which does not have a steering wheel or pedals. The “purpose-built” electric vehicle was co-designed by GM and Honda (chart 2nd below), with GM designing the electric powertrain, sensing and computing technology, and the base vehicle design.
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Honda Motor Company [HMC] |
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| This looks like just the beginning of a big move higher. |
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I expect Amazon to break out of this triangle pattern to the upside.
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| The air has to be getting thin up here for Apple. |
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| I'd still rather be long than short here... |
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Alphabet CEO Sundar Pichai has come out in support of an EU proposal for a temporary ban (for up to five years) on the use of facial recognition in public areas until officials beef up privacy regulations.
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Select Economic Announcements: |
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As always, make up your own mind and, more important, minimize your risk no matter what you do.
KIS,
The Trader
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