VRA Investing Podcast – Tyler Herriage – December 11, 2023

About This Episode

In today's VRA Investing Podcast, Tyler Herriage delves into the latest market developments, including the upcoming FOMC meeting and the release of CPI data. Tyler also shares insights on sector performance, commodities, and cryptocurrencies. Stay tuned for a comprehensive analysis of the day's market activity.

Transcript

Don’t look back because the market is closed. Good Monday afternoon, everyone. Tyler Herridge here with you for today’s VRA investing podcast. We hope you all had a great weekend out there and an even better start to your week this week. Hope you’re well rested because it is an important week ahead. For more our markets here. We’ve got a lot of economic data coming out this week, and of course, all eyes are on the final FOMC meeting of 2023. And then we’ll get a little break from the Fed, which is always nice, a couple of them.

The next meeting isn’t for another month and a half, and the one after that, another month and a half. So we’ll get a little break there. But if today was any indication of what we’re going to get for the rest of this week, then it should be a very good week. We should get some good economic data back. Good news from the Fed. I say that because today we saw a number of fresh 52 week highs and yes, all time highs as well today. So let’s dive into what we’re going to see on this busy week. First off, tomorrow morning, we’ll get the latest look at inflation.

We get November’s CPI data coming out tomorrow morning. Expectations right now are for 3.1% year over year. That’s just on the overall CPI doesn’t include core CPI, which the Fed apparently looks more closely at. But expectations again for 3.1% be back to back months of declines there. And the lowest number on the year over year reading since June, where we hit 3%. We said it for some time after June, we’re seeing inflation heading in the right direction, but it was never going to go straight down in a straight down line, that is. So we got a little bit of a pop after July. Got back to what? Three, let me think here.

Let’s see here. We got it. We got 3.2% in July, 3.7 in August and September, then start trending back in the right direction again. We got 3.2% in October. So at 3.1% would be once again a clear indication that we’re still trending in the right direction again. It was never going to be a straight down fall, peak to trough from the peak on inflation in 2022. But we do look for this trend to continue for inflation to turn into at least disinflation. And while we don’t advocate for inflation here, the goal for inflation should be 0%.

As a matter of fact, it was 0% until about the 70s. If you go back and look at some of the FOMC notes from then, from that time period, you’ll see their goal was to get to 0% inflation. It wasn’t until more recently that countries intentionally were outspoken about devaluating their currency at 2% per year. But there is some benefit that does come with inflation, increased asset prices. Now, of course, Kip has talked about this a lot. We’ve talked about it here a lot on the know. There really are two americas now, those that own assets and those that don’t. It’s not a reality that we have to, like, certainly don’t hear, but that is the reality.

If you own assets, they’re increasing in value due to inflation, assets being not just like your house, but stocks, gold, other hard assets here. And those assets perform best when inflation is between two and 3%. That’s just the way that it works here. Gains on years where inflation is two 3%, the average gain in the SP is 13.8%. If it’s zero to 2%, the average gain is 10.7%. So if we are going to see a year next year where inflation does continue to get better and better between that two and 3% range, we should look for another very strong year in the market. So after CPI tomorrow morning, we’ll also get the producers price index on Wednesday morning, just in time for the conclusion of December’s FOMC meeting, which will be followed by another presser here from the money printing rockstar himself, Jay Powell. Now, I will say Jay Powell has not been as bad lately in talking the markets lower when he gets in front of a microphone.

So let’s see if that’s a new trend we can see continuing. We reported on this for the last couple of years. Now, Jay Powell has the worst track record of, well, really the last four. They didn’t start doing these pressers after every FOMC meeting until under Ben Bernanke. So you got just a few Fed chairman between now and then. But Jay Powell is by far the worst at talking the market lower. When he gets on stage, the market typically tends to tank, at least on the initial reaction. So we’ll see if he can continue to at least not talk the market lower on Wednesday’s meeting.

But if you’ve been paying attention here at the VRA or following the Fed, you know that he’s really not in a very innovative place right now. It’ll likely be more of the same we’ve seen from his last few press conferences, last few FOMC meetings, something along the lines of, well, we still have work to do on inflation, but at this time conditions are sufficiently restrictive. I would be shocked if he didn’t say almost that direct quote at some point on Wednesday. Now, I also wouldn’t expect him to have any comments on rate cuts in 2024. That question is going to come up. It’s been a big topic lately with analysts coming out with predictions all over from cuts being in the first quarter, second, 3rd, but at some point in 2024, most analysts are calling for cuts. So we’re definitely going to get a question on whether or not they’re looking into it for 2024. I think that he’ll try to evade answering those questions as much as possible and kind of give a hawkish tone to it.

Something along the lines of, oh, we’re not even thinking about that yet. Next question. We’ll see if he can do it in that few of words. He’s not very good at that either. No shade being thrown there. I might not be the best at it sometimes either, but he does have a habit of putting his foot in his mouth when he’s up on stage answering questions. That’s usually when the sell off becomes the worst. But really, the only question here of rate cuts for 2024 is will it be sooner or later they’re most likely going to be cuts next year.

The market fully expects it. Futures pricing data roughly an 86% chance that the Fed will cut rates by May of 2024 meeting, and a 99% chance they’ll cut rates by September. And check this out. The CME Fed watch tool is even now reading a 30% chance that the Fed will have cut rates by a full percentage point by September. That’s not an insignificant probability there that the market is reading into now. Again, back to tomorrow’s meeting. It’s unlikely that he’ll say anything about it. But let’s remember this as well, that the Fed usually only cuts rates when something is broken or something has gone wrong.

Now, if they’ve reached a point where inflation is just at below 2% for a few readings in a row, maybe it could get away with saying, oh, we’re just going to cut a quarter percentage point here, 25 basis points for the next couple of meetings, and then we’ll pause again. That could happen. It’s usually pretty rare when the fed starts cutting rates. It’s usually because something is broken and they have to do that. So let’s hope that we can push off the rate cuts as long as possible. That really is probably the best case scenario right it means that they would have gotten the soft landing. You know, as much as we dislike the Federal Reserve, very much in the Ron Paul camp of, in the Fed, but if they could pull it off, hats off to them, then if we were to happen to see rate cuts in 2024, kind of a strategy layout here of if we see the signs of weakness, we might take profits in some of our shorter term positions, but our view, we’re looking at a roaring 2020s here with a phenomenal ways to go. Right.

We haven’t even started to really hit all time highs, at least not in our major indexes. So until we get there, the bull market really doesn’t hit into its next leg yet. And we’ve said for some time we’re looking at a rally that could rival the 1995 to 2000 dot melt up. So that’s what we’re looking for going forward. So any pullback that we got due to weakness, due to what the Fed is doing, make no mistake about it, we would want to be getting our positions then on a pullback like that. We’ve said it for some time, not just buy the dip, but the smart money move here is to continue to buy the dip. But the market certainly didn’t show any signs of wanting to slow down today. We saw a number of 52 week highs and all time highs especially good to see them in our favorite sectors, SMH today, the semiconductor ETF up 2.4%.

That hit an all time high there, which was really good to see as we had Nvidia, the largest name in the group, down 1.85% on the day. So good to see the semis rallying, even with the general there taking a little bit of a pause. We also saw an all time high in the tech sector today. Get to where we are in the Nasdaq in just a second. But then, so we talk about this often, you want to see semis and housing lead. We saw semis hit an all time high. Housing did as well again today. HGX, the housing index, hitting an all time high, along with homebuilders, etfs, hitting all time highs.

But you also had toll brothers, Lennar, Dr. Horton, all of these major home builder players hitting all time highs, or at least 52 week highs as well. So really good to see there. So looking at our markets on the day, we were led by the Dow today, up zero point 43% to 36,404 at the close today. That’s just 530 points away or so from its all time high. That’s going back to January 5, 2022. Right now, again, just about 530 points away from that number. The S and P hit a 52 week high today.

Really good to see. I believe the Dow Jones did hit a 52 week high today. Just to clarify there as well. That was a 52 week high, just not an all time high. Same with the SP 52 week high today, up just under four tenths of 1% to 4622, just about 200 points away from its all time high, also in early 2022. Next up, we had the Nasdaq up two tenths of 1% to 14,432, just at the highs of the day. Just about ten points away from its 52 week high as well. I’ll cover that in the sectors.

Thing about meta was down on the day. Not helping it there. I’ll get to that on the sectors though. Finally here, small caps up zero point 15% to 1883. I was going to cover our internals as usual today, but there has been an error in the reporting from both of our internal sources here. They looked really light earlier and then now they’ve erased them completely. It’s zeros for every one across the board there from what we saw earlier in the session. It was a fairly light day though, but mostly positive out there just fractionally.

No big two to one beats or anything. So we’ll see tomorrow. I’m sure they’ll have this refreshed, just not in time for this podcast today. So next up then, we’ll take a look at our sectors where we finished with ten out of our eleven s and p 500 sectors higher on the day today. We were led by consumer staples and then industrials, which is also very close to an all time high. At the highs today, less than one point away from its all time high. After that, materials, which I believe is also not far, at least from a 52 week high. It’s got a little work to do there.

After that. Financials, which are very close to a 52 week high, are one laggard on the day was communication services. This is where I thought if I’d bring meta into this, which was down 2.24% on the day, which would explain communication services being lower, makes up like 20% of that sector weighting, and Google makes up another 20% of that sector weighting. Google also down 1.2% on the day today. So that explains a little bit of the action and communication services there as well. Finally here for today, let’s get a refresh on our commodity screens. Just 1 second. All right, so a little bit of red on the screen here.

Gold is lower on the day by zero point 84%. Now to 1997. Kip and I were talking about this earlier today as well, that we’re seeing now that bonds at least, bond prices are at extreme overbought levels and bond yields getting close to extreme oversold levels, at least before. So this is about when you might expect to see a little bit of a pause. Of course, stronger yields and a stronger dollar don’t exactly bode well for the price of gold. But I also will point out the ten year yield was higher earlier in the session. Now lower down zero point 14% at a 4.23 there, finishing for the ten year yield. So gold’s had a good roman.

This is another group we still remain very bullish on here. We do want the miners to start acting better here. Let’s see where the US dollar finished. We were up slightly on the dollar today, but again, just a couple weeks ago it was at extreme oversold levels. So to get a little bit of a bounce there is not of a concern to us, just would mean a little bit of tough times for commodities. Silver down as well today, down just over six tenths of 1% to $23.13 an ounce. Copper down bigger 1.23% to $3.78 a pound. Also point out that for those of our listeners who have checked out our new website, you can also view all of these.

We have a lot of them. At the ticker tape atop the website, you’ll find our major indexes in there, dollar index, gold trading, and then under our analysis tab, you can also run your own charts as well. If you want to take a look. Powered by trading view there, just phenomenal access. You’ll see everything. It’s all major markets on there, including some of our VRA timbaggers. If you’re a member, you can take a look at them on the charting services there as well. And then finally, for our commodity watch, oil rallying a bit here.

Up a quarter of 1%, but back above $70 a barrel at 71 dollarsforty cents. And finally for today, bitcoin selling off a little bit, kind of working on a piece right now about some of this new surveillance tools that the government’s going after to pass now as well, which could impact crypto in a big way. Crypto down on the day. A lot of red on the screen here, but bitcoin down 5.76% now to $41,263 of bitcoin. Folks, that’s all that we have time for here today. Please be sure to subscribe to receive our VRA podcasts every day at the market close, you can sign up@vrainsider.com. Is still where you would sign up, but if you want to take a look at our transcript and everything else, you can check it out@vraletter.com under the resources tab there for podcast. We’re still getting all that cleaned up.

You’ll have the subscribe form on that page soon, though. So thanks again for tuning in. Until next time. We’ll see you back here tomorrow for the close. Bye.

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Time Stamps

00:00 Inflation was 0% until the 70s.

05:34 Fed's likely conservative stance amid rate cut speculations.

08:01 Fed may cut rates if inflation low.

13:23 Financials close to 52-week high, communication services laggard.

16:20 Oil up to $71.40, bitcoin down 5.76%.

17:14 Subscribe form coming soon, thanks for tuning in.