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VRA Investing Podcast – Tyler Herriage – December 13, 2023

In today's episode, Tyler Herriage analyzes the market's outstanding performance, touching on inflation data, the Fed's latest FOMC meeting, sector highlights, bullish signs for commodities and cryptocurrencies, and one of our maj ...

Posted On December 13, 2023Episode 1296
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About This Episode

In today's episode, Tyler Herriage analyzes the market's outstanding performance, touching on inflation data, the Fed's latest FOMC meeting, sector highlights, bullish signs for commodities and cryptocurrencies, and one of our major indexes officially taking out all-time highs.

Transcript

Don’t look back because the market is closed. Good Wednesday afternoon, everyone. Tyler Herring here with you for today’s VRA investing podcast. Hope you all had a great day out there today. Wow, was it a great day for our markets today. An eventful day all around here. We saw major indexes hitting 52 week highs. Even one out there that hit an all time high today.

We got all time highs in major sectors, 52 week highs in major sectors as well. Huge names hitting all time highs or 52 week highs today as well. So very good day out there today. We’ll cover a lot of that here today. And I’ll kick it off here with this morning’s inflation data. And we’ll also cover some of what the Fed had to say today in their final FOMC meeting of 2023. So now that that’s out of the way, we don’t have to hear from the Fed until the end of January now, which is always nice to get a little bit of a break there, especially around this year end time. And good news here is the typical holiday rally hasn’t even really begun just yet.

We’re getting a little bit of an early Christmas present, it seems like, so far. So let’s kick it off with the inflation data here today as this morning, we got the producers price index after yesterday’s CPI report, which came in in line with expectations this morning. PPI coming back down to 2% for the first time since January of 2021, as we did come in below estimates today. If you’ve been tuning in with us here for some time, you know that we have been saying that disinflation is here. It’s been one of our three primary VRA inflection points. I’ll cover all three of those here in a second. But good to see inflation coming in at a good number today. And that might have had some influence on the Fed’s decision today.

These numbers came out while they’re still in their meetings today. Then their minutes were released at 02:00 p.m. Eastern time today. That is when the Fed announced for the third time in a row that they will not be raising rates. And they are, in fact, beginning to talk about rate cuts for 2024. It wasn’t more than a couple of weeks ago that Jay Powell said they weren’t really thinking about lowering rates, but here we are anyway. I mean, this is one of the reasons why people who really watch the Fed are really just so over what the Fed has to say. They’ve gotten so many calls wrong over the last few years, whether it’s inflation was transitory or the 2018 December from hell.

I mean, those are just two of the biggies right in front of us. But people are catching on to the fact here that the Fed never leads. They only follow the market. And if you follow the market instead of the Fed, then you’re going to be ahead of the curve. Because these Fed watchers, Fed economists and analysts, if you didn’t listen to those people, you had a pretty good year. If you listened to them, then you were misled, right? Just like you were misled on believing that inflation was transitory. Now, I know we’ve got a big smart money audience here, so that wasn’t necessarily the case. But it’s amazing how many people, analysts that you see, whether it’s on Twitter or in the mainstream financial media, who take what these people have to say as gospel and then go to preach it to everybody else, right? It really is pretty amazing because they’re so often just so wrong.

Remember, just this year, all of these so called analysts and economists were calling for a recession in 2023. So it was going to be a rough year for the stock market and even worse for the economy. Instead, we’ve had an amazing year for this market. The s and p just hit a 52 week high. Dow Jones all time high. Nasdaq 52 week high. I mean, up 20 plus percent on the year for the s and p so far, just shy of what we were looking for, a 30% call from the beginning of this year. We still got a little time left on that one.

But remember this as well. Stocks tend to lead the economy. So as we wrap up a great year for stocks, we’ll look at that as another clue that the economy is also likely to be better than most expected in 2024. Already analysts are coming out looking pretty bullish for 2024, but they could be on the low side. That’s what we’re looking for here. But within minutes after the FOMC minutes came out and that news was announced that they are looking at more rate cuts than expected for 2024. Our major indexes just shot up from there, and the ten year yield fell off a cliff. The US dollar fell off a cliff.

Gold shot back up above $2,000 an ounce. The race was on after the all clear from J. Powell today, as in the minutes they covered, the Fed lowered its median interest rate projection for the end of 2024 by quite a bit, from 5.1%, which would imply roughly one cut next year, to now 4.6%, which is three cuts for 2024. At least that’s the implication here. So a much more aggressive rate cutting plan than previously expected from the Fed. Now, that’s just one less than the market currently expects. With four rate cuts expected in 2024 from the market, at least we’re seeing it in the CME Fed watch tool as well as the ODS for a March cut, jumped overnight from roughly just below 40% yesterday to now 66% chance of a rate cut in March. We’ve said it for some time that the last few rate hikes that we got from the Fed, even if they were just 25 basis points, only accelerated the timeline in which they would have to cut rates.

So now that timeline has come all the way up, I mean, the majority view is now first quarter of 2024 as far as the CME Fed watch tool is concerned. Now, what Jay Powell said in the meeting echoed this as well. A dovish meeting here saying that we don’t want to be too late on cutting interest rates. So it’s Jay Powell saying the Fed does not want to be too late in cutting interest rates. Well, they were too late to start raising rates, so we’ll see if they get it right on the downside. But what we were seeing here, and what we need to remember, ourselves included, is perspective here. And we’ve been talking about our three VRA inflection points here since earlier this year. There are one the resumed bear market in the dollar.

After today’s news, the dollar sold off big time. If we are headed into a more easy money policy, we expect that to continue, which bodes well for stocks. We also called for lower yields. Well, today the ten year yield just hit another multi month low, its lowest level since the end of August. Today getting down right at a 4% now down 4.1% on the day, at a 4.3 on the ten year. Talk about a massive fall since their peak in October. Well, let’s get an exact percentage on how far yields have fallen since their peak in October. We peaked out at a 4.99, I mean, almost 20% losses on yields so far.

While bond prices continue to rally, we expect that trend to continue. And disinflation as well, as we saw, not quite to deflationary territory yet, but we are beginning to see disinflation in both CPI and PPI. And as we say here often as well, it’s never going to be a straight line down. We’ve gotten continued better data coming out here. So what’s important to remember here, though, as I’ve talked about this, Kip has talked about this as well. The time to buy stocks is not when the Fed is cutting rates. It usually means that something has gone wrong. That might not be the case here if they get into this early, but the time to buy stocks is before the Fed cuts rates.

So a bit of a buy the rumor, sell the news type of scenario there. And as we see it, we are just at the beginning of a new bull market, one in which dips have to continue to be bought. And it’ll be interesting to see. We’re seeing a little bit of this great reset that we talked about. Not the great reset that Klaus Schwab talks about, by the way, but a great financial reset here where the Fed has hiked rates enough to where now they’ve got some ammo. To the downside, they don’t have to cut rates in a big way with a scenario like mean. This is decades worth of financial engineering that they’ve cleared the air for here, where they can slowly cut rates as needed. But a bit of a reset here for where yields were back from the zero interest rate policy.

Right? We’re far off of that mark now, and we’ve got some room to cut before we get back there. So really, from our point of view, it leaves decades open of potential financial engineering, which, like it or not, it’s the system that we live in. Again, we don’t like it here. We’re very much in the Fed camp, but like it or not, that’s the system that we exist in. So we can complain about it all we want, but at the same time, we need to be making money off of it as well, because inflation is not going to just completely go away. Even a 2% target. That means that your dollar is losing value every single year. And the only way to offset that is by owning assets.

So we preach that here often at the VRA. But remember this again, that this is the beginning of a new bull market, one that we believe will rival the 1995 to 2000 bull market. We just hit all time highs today in the Dow, and there’s still $7 trillion sitting on the sidelines in money market funds right now. So we’re going to see a lot more of that money coming off of the sidelines at these levels, only adding fuel to the fire. And as Kip talked about on his podcast, I believe it was yesterday as well, that a market that gets overbought and stays overbought is extremely bullish. We could be seeing a lot of that here as these money market funds come off of the sidelines. So that said, let’s take a look at our market action on the day today as we finish higher across the board here. Small caps leading the way in a huge way today, up over three and a half percent to 1947.

Now just about four points away from its 52 week highs, at least based off of IWM, the small cap ETF. We’ve called for this group to play a lot of catch up here going forward. So good to see it doing so today. It was our only major index out of the four that we quote here. At least that did not hit a 52 week high today, but it is right there. Next up, the Dow Jones up 1.4% or 512 points on the day, closing above 37,000 for the first time ever. That’s an all time high in the Dow Jones, closing at 37,090 for the Dow. Next up, Nasdaq, also hitting a 52 week high today of 1.38% to 14,733.

Still has some time to go. A ways to go, I mean, to its all time high of 16,212. That’s from late 2021, which again tells us this bull market is still in its infancy. Not until we hit fresh all time highs is it really game on for a new bull market. So we’ve said that for some time, this is the market giving us a gift here, and pullbacks need to continue to be bought. Nasdaq again up 1.38% on the day. And lastly here, the S and P 500, also hitting a 52 week high today, up 1.37%, just about 100 points away from its all time high at 4707 for the S and P 500. So very good day.

We are at extreme overbought levels in our major indexes. Again, a market that gets overbought and stays overbought is very bullish, but something that we’ll continue to alert you to here, what we’re seeing in the VRA investing system. Looking at our internals on the day. We got a very strong day here, as well. As you might expect, advancing stocks beating out declining stocks in a big way. Over eight to one positive on the NYSE, over three to one positive on the Nasdaq. Next up, 52 week highs to lows. Also positive in a big way.

Over ten to one positive on the NYSE. Over two to one positive on the Nasdaq. And finally here, volume really crushed as well, coming with 89% upside volume on the NYSE. Anything over 80% is looked at as very bullish by technicians. We’d like to see some follow through on that and then to the Nasdaq, over 80%. Upside volume as well, coming really right at 80%. But we don’t see that as often in the Nasdaq. So very good to see as well today.

So positive across the board from the internals on the day today. And then for our sector watch, all eleven SP 500 sectors finishing higher on the day. And a number of 52 week highs are multi month highs and all time highs here as well. Utilities leading the way, which makes sense as they’re the biggest borrowers in the nation. Yields down in a big way. So utilities makes sense to see them leading here, hitting their highest level since August though, up a big 3.7%. Real estate hitting its highest level since February as well. But if you’ve been with us for a while, you know that we love housing and we look at housing and the semis to be our two leading economic indicators.

Well, the real estate sector doesn’t really give us that. So we look at the housing index instead. But HGX hitting an all time high today as well as the home builders. But HGX up a big 2.77%. Home builders hit an all time high as well, up between two and a half and 3%. So very good day for one of our leading economic indicators there. After that we had healthcare, which is very close to a 52 week high. The financials, which did hit a 52 week high, up 1.6% on the day today.

We also saw industrials hitting an all time high today. And finally tech hitting an all time high as well, which is exactly what you want to see. And what do we see? Semis, leading tech, which is always what you want to see. Semis hit an all time high today as well. So very good finish to the year so far. And really the most bullish time of December is the end of December. So to get this early, we’ll take it as an early Christmas present. But we do want to see a strong Santa Claus rally this year as well, which is the last five trading days of the year into the first two trading days of the following year as well.

So that said, let’s take a look finally for today at our VRA commodity watch. As I mentioned earlier, commodities in general really shot up after the Fed minutes were released at two eastern today. Gold, one of the biggest, up two and a half percent now at $2,043 an ounce. So it broke through 2000 and right up quickly to $2,043 an ounce. Now, we have pulled out here of extreme overbought territory, which it was at before this pullback. So good to see we’ve got some room to run there. And in addition to that, we also recently got a golden cross with the 50 day above the 200 day moving average. A very bullish technical signal there.

And another bullish sign today from gold was the gold miners outperforming in a big way. GDX, the gold miner. ETF, up 6.38%. Our VRA birec, which is a three time leverage, sorry, two time leverage. ETF up over twelve and a half percent on the day to day. And what we like to see on the chart is that recently gold miners broke out of their downtrend. They pulled back to the support levels we were watching for, and then today bounced off those supports in a big way again, up 6.38%. In our pre podcast meeting today, Kip wanted to make sure that I talked about this, that we wrote to members this morning about how bullish we are on the miners.

We’ve talked about it here a lot as well. But from what we see on the board right now, this is the cheapest thing out there with the most room to run. So do that information what you will, but we remain very bullish on this group going forward. Next up, silver, up 4.77%. Big day today to $24.11 an ounce. Copper up as well, 1.25% to $3.83 a pound. And lastly, oil, up 1.84%, still below $70 a barrel at $69.87 a barrel. And finally, for today, bitcoin was already up earlier in the session, but just continued to add to its gains after the FOMC.

Minutes now up five and a half percent on the day, getting back close to its 52 week high at 43,380. A bitcoin. Lot of green on the screen from crypto today. But folks, that’s all 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 click the podcast link at the top, and also you can see our transcripts now@vraletter.com. We’ll be fully transitioning over there soon, but if you want to sign up for a podcast list, you can find a sign up form@vrainsider.com. Just click that podcast link at the top, but you can listen as well as see the transcript on Vraletter.com.

I know that’s a little confusing, but we’re working our way through phasing out that old website there. So thanks again for tuning in. Until next time. We’ll see you back here tomorrow for the close.

Podcast Newsletter

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Time Stamps

00:00 Fed followers misled, market anticipation successful.
05:32 Gold surges over $2,000 after Fed news.
09:25 New bull market beginning, buy the dips.
11:00 Bullish market predicts rise with $7 trillion.
14:52 Positive market performance with sectors hitting highs.
17:38 Gold miners outperforming, bullish sign, bouncing up.

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