Home About Archives RSS Feed

@theMarket: Is the Market's Holiday Rally on Track?

By Bill SchmickiBerkshires columnist
Fed Chairman Jerome Powell delivered a bagful of gains this week for investors. Stocks roared to life as "Santa" came to town. And then the job numbers on Friday spoiled the mood.
"The time for moderating the pace of rate increases may come as soon as the December meeting," said Powell in his opening remarks at the Brooking Institute on Wednesday, Nov. 30. The word "moderating" was all the algos needed to hear.
It was equivalent to striking a match to a kid's backyard toy rocket. The U.S. dollar fell, stocks across the board exploded and the main indexes racked up gains of 3-4 percent-plus by the end of the day. Commodities also roared higher led by precious metals.
Thursday the Personal Consumption Expenditures Price Index, a key inflation data point that the Fed uses to monitor inflation also came in cooler for October. The PCE rose 6 percent in October versus last year and down from September's 6.3 percent annual increase. Overall prices rose 0.3 percent, which was the same monthly increase as in each of the previous two months. It could be that Powell had an inkling that the inflation numbers were improving, which could have contributed to the slight shifting of goalposts this week.
However, Friday's monthly jobs report for November came in "hot." Non-farm payrolls came in with a 263,000 gain versus the 200,000 expected. Average hourly earnings on a month-to-month basis rose 0.6 percent versus the 0.3 percent expected. That data may be good for the continued growth of the economy, but also means that the Fed has no reason to relent in its hawkish stance. As a result, markets gave back about a third of their gains for the week.
Does that mean we should expect hotter or cooler Consumer Price Index (CPI) on Dec. 9, and Price Producer Index (PPI) data on Dec. 13? Given the inaccuracy of macroeconomic data, I would say that is at best a crap shoot.
The most important events that investors face are the OPEC-plus meeting on Dec. 4, and the European Union (EU) Russian oil embargo and price cap on oil the following day. This could prove to be a disruptive event on world energy prices. What happens to the oil price has a direct bearing on future inflation, so financial markets will react to these events.
If an EU ban on purchasing Russian oil leads to the removal of up to 2 million barrels per day of oil from the market, we could see a spike in energy prices.  To prevent that from happening, the U.S. and G-7 nations have devised a price cap scheme where that oil can be sold to non-European nations but only at a lower price. The question is the price.
The latest number was $62 a barrel cap, but Poland, Estonia, and Lithuania are arguing that the price is still too high. The facts are that if India or China ignore the whole price cap ban, which is a distinct possibility, then what could happen is that most of this spare Russian oil will simply be rerouted to these two large consumers of oil.
Bottom line: next week could see some wild swings in oil based on geopolitical headlines from various players so be prepared. 
Last week, I wrote that my target for the S&P 500 Index of a high between 4,000-4,100 had been met and it was time to take profits. This week we hit the top end of my range before falling back. Could it climb higher? It could, but it seems to me that market action tells me that we are closer to a top, not a bottom. I will be taking profits as we climb higher.
If I am right, what is the potential downside for the markets? I expect a 125-to-250-point (up to 6 percent decline) to as low as 3,700 on the S&P 500 Index. 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.



Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
Owner of Abandoned Cats Pleads Guilty to Animal Cruelty
Pittsfield's Kalinowsky Seeks Voters' Input on North Street Traffic Confirguration
Upcoming Nursing Accreditation Review Visit at BCC
Weekend Outlook: Jan. 27-29
Clark Art Screens Experimental Animation Short Films
Williams College: Imani Perry 'South to America'
MassDOT Advisory: West Stock Bridge Gaurdrail and Bridge Repair
Adams COA, Town Seek Funds for Memorial Building Bathrooms
BCC Holds Pinning Ceremony for the Inaugural January Class
Berkshire NAACP Freedom Fund Awards Honor Activists

@theMarket (435)
Independent Investor (451)
Retired Investor (126)
January 2023 (6)
January 2022 (1)
December 2022 (7)
November 2022 (7)
October 2022 (8)
September 2022 (9)
August 2022 (5)
July 2022 (7)
June 2022 (7)
May 2022 (7)
April 2022 (8)
March 2022 (9)
February 2022 (7)
Fiscal Cliff Interest Rates Stimulus Commodities Banking Energy Employment Debt Federal Reserve Stock Market Bailout Pullback Deficit Metals Europe Currency Markets Taxes Jobs Retirement Recession Oil Debt Ceiling Banks Selloff Economy Greece Euro Crisis Election Rally Congress Stocks Europe Japan
Popular Entries:
The Independent Investor: Don't Fight the Fed
Independent Investor: Europe's Banking Crisis
@theMarket: Let the Good Times Roll
Independent Investor: Enough Already!
@theMarket: Let Silver Be A Lesson
The Independent Investor: Japan — The Sun Is Beginning to Rise
Independent Investor: What To Expect After a Waterfall Decline
@theMarket: One Down, One to Go
@theMarket: 707 Days
The Independent Investor: And Now For That Deficit
Recent Entries:
@theMarket: Macro-Economic Data Indicate a Soft Landing
The Retired Investor: Back to the gym
The Retired Investor: The Billionaire Lottery
The Retired Investor: Beware Political Pollsters
@theMarket: Markets Are Stuck in Chop City
The Retired Investor: U.S. Income Inequality
@theMarket: Good News on Economy Is Bad News for Stock Market
The Retired Investor: Are Christmas Trees Worth It?
@theMarket: Markets at Odds With the Fed
The Retired Investor: Why the Stock Market Needs to Decline