Broker Check


THIS WEEK'S UPDATE

| January 16, 2024

First, let's acknowledge MLK's birthday by agreeing all that really matters is the soul our creator has given us and how we choose to share it with others.  We can choose to try and better this world by helping and encouraging others and realizing we aren't really all that different.  Especially in this election year.  Don't buy into the us versus them mentality.  That's for fools and if you're on this newsletter list, you're no fool.  Now, on with our regularly scheduled update.

The Week On Wall Street
Stocks pushed higher last week, led by big tech names and boosted by December inflation reports that were mixed but positive enough to shore up investor confidence in Fed rate cuts this year. It was a rocky week that ended on a high note. Stocks rallied Monday after the prior week's decline. Tech shares led, with the Nasdaq posting its best day since November 14. On Tuesday, stocks initially tumbled but recovered most of their losses late in the session. Stocks rallied on Wednesday ahead of inflation news the following two trading days. Stocks fell initially on Thursday in response to a hotter-than-expected inflation report, reflecting investor concerns about the certainty, timing, and extent of Fed rate cuts later this year.  On Friday, the start of earnings season brought mixed results from a handful of major banks. By close, stocks had recovered most of their losses, ending the week with solid gains.
 
A Tale of Two Inflation Reports
The biggest economic news last week was fresh inflation data. The Consumer Price Index (CPI) rose 0.3 percent in December over the prior month and 3.4 percent compared with a year prior. That number was higher than the 3.2 percent increase economists expected and a few ticks elevated from the 3.1 percent figure in November. Core CPI for December, which excludes volatile food and energy components, rose 3.9%, a slight decrease from November's 4.0% gain. On Friday, the Producer Price Index (PPI), which measures inflation by domestic producers, showed a drop of 0.1% for December, possibly suggesting that the CPI’s uptick may have been an anomaly.
 
Bitcoin Bonanza
The successful launch of 11 Bitcoin ETFs, with over $4 billion in total trading volumes and BlackRock’s fund exceeding $1 billion, represents a remarkable achievement for an asset class born from an open-source community of software developers just 15 years ago. The day one price action post-ETF launch, marked by Bitcoin’s alignment with U.S. risk assets amid fluctuating rates and hawkish Fed comments, suggests a possible return to its correlation with US financial markets. 
 
This Week: Key Economic Data
Tuesday: Empire State Manufacturing Index.
Wednesday: Retail Sales. Industrial Production.
Thursday: Jobless Claims. Housing Starts. Petroleum Status Report. 
Friday: Existing Home Sales.
 
This Week: Notable Companies Reporting Earnings
Tuesday: Morgan Stanley (MS), The Goldman Sachs Group, Inc. (GS), Interactive Brokers Group, Inc. (IBKR)
Wednesday:  The Charles Schwab Corporation (SCHW), U.S. Bancorp (USB), Alcoa (AA)
Thursday: M&T Bank Corporation (MTB), Northern Trust Corporation (NTRS)
Friday: Schlumberger Limited (SLB), The Travelers Companies, Inc. (TRV), State Street Corporation (STT)
 
Final Thoughts
The Bitcoin ETFs were the news of the week as mentioned above.  Inflation continues to cool and now the Fed will turn to employment while keeping a watchful eye on housing, which is still a little hot.  Stocks will soon turn to earnings for their marching orders for the next month or so.  
 
The first of two government shutdown deadlines arrives next Friday, and House Speaker Mike Johnson (R-Louisiana) is running up against the same problems that plagued his predecessor, Kevin McCarthy, in trying to negotiate a deal to pass funding legislation. Sen. Charles Schumer (D-New York) is planning a proposed short-term Continuing Resolution to avoid a shutdown if Johnson is unsuccessful, but it is unclear whether Schumer’s backup plan can work. It’s early in the election season, but Monday’s Iowa caucuses could be a significant step in former President Trump’s effort to secure the GOP nomination if he can secure a big victory.
 
It's election year.  Never waste a crisis appears to be the mantra of our esteemed leaders.  I wish I could wake up in November presuming we have a clear winner.  Once earnings are in the rearview this quarter the nauseating politics of the election may take over for a quarter or two.  Keep in mind investing is a long term prospect and no showman elected President is really long term.  This is why the markets typically calm down after an election.  It knows what it will be dealing with for the next few years.  But, real returns in the market, the ones that build real wealth, are done over multiple elections, not one.  Keep that in mind as the media tries to sell you that this one is the big one to end all big ones… until next time.  Well, that’s it for this week.  Stay tuned.