There are still summer vibes in the market, stocks are holding up nicely, and major equity indices remained within striking distance of upside breakouts yesterday.

There was eclectic leadership with a lot of bottom fishing, DexCom (DXCM) and short squeezes with Tesla (TSLA).

Key Charts

Consumer Discretionary (XLY) continues its dominance over Consumer Staples (XLP) —and lots more upside potential.

The Russell 2000 is at its lowest point against the S&P 500 since 2001.

The strength in specific niches of Consumer Discretionary is interesting, considering evidence of rising caution and less optimism:

Consumer credit continues to tumble as well.

The plot begins to thicken today with the National Federation of Independent Business (NFIB) data, and the Consumer Price Index (CPI) report could move the needle soon.

Portfolio Approach

There are no sector weighting changes in the Hotline Model Portfolio this morning.

Today’s Session

More early morning indecision, which isn’t a bad thing in the current labyrinth discovery process.

It’s not hyperbolic to declare 2023 as one of the most confusing economies and markets for the current generation of investors.

I continue to point to all the cash sloshing around – have never seen anything like this.   Currently, 80% of all the cash in the United States was printed since 2020.  Fiscal and monetary policy has run amok.

While quantitative easing and ultra-low rates played a role in the spike in inflation, it was Powell’s belief that the cure for high prices would be high prices. That is the legacy he is currently trying to erase.

To be honest, I’m very worried his ego is getting in the way of sound judgment.  We’ll get the CPI report tomorrow for more clues, but at this very moment, I think it would be a grave mistake for the Fed to continue hiking rates. 

All that cash had the same effect as earthquakes in Godzilla movies – it awakened a beast that was buried deep and forgotten – in this caused runaway inflation.

While it’s clear the inflation has come down, this morning the NFIB small business optimism report came in below consensus at 91.3, which is well below the 49-year average of 98.0.

The biggest concern?

Inflation.

The component that made the largest move was the “expect economy to improve” – which came down 7 percentage points.

 

Comments

Ah, but wasn’t there a redefinition/recharacterization of M1 around 2020, accounting for the nearly instantaneous spike in that value as shown on the chart (and reflecting a bit of diversionary sleight of hand)? Ronald Lukas on 9/13/2023 12:54:33 PM

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