Things you need to know.

• Global Mkts Up, Treasuries Up, Oil Up, Gold Up and Bitcoin UP – see the pattern?
• Biden pushes his $1.9 tril plan, Janet Yellen throws her support behind it.
• Larry Summers (blast from the past) warns of surging inflation – 30 yr treasuries agree.
• No Eco data today, and it is the last week of earnings…
• Try the Carrot Souffle

Stocks did it again…they rose even higher on Friday even as the pace of new job growth came in substantially lower than the expectation…. suggesting that the road back remains long and full of potholes…. And while the drop in unemployment is supposed to make you feel good – 6.7% down to 6.3% – the drop was due to the fact that more people STOPPED looking and DROPPED out of the workforce – creating the impression that unemployment is going down….that is a mistake……What it does mean is that more people were NOT actively looking for a job, they have grown frustrated about the prospects of getting a job – so they just stop and then they fall off the rolls and when they do – guess what number goes down?  Bingo – the unemployment number….so do not get fooled into thinking it is getting better right now…. ……And while the NFP report showed a gain of 49k new jobs- it was well below the expected jobs number of 107k….in fact – it was 54% below the expectation!

But that did not deter the bulls from buying…. because what it does mean is that the Biden $1.9 trillion plan will gain even more support and cause the Dems to force it thru the senate by reconciliation…. leaving the Republicans sitting on the curbside.  But we knew this was going to happen…. we knew that Nancy and Chucky did not have any intention at all ‘working’ with Mitch and Kevin (McConnell & McCarthy) – in what is one of those ‘payback is b*tch moments’.  Whatever….!  By 4 pm – the Dow added 93 pts or 0.3%, the S&P up 15 pts or 0.4%, the Nasdaq up 79 pts or 0.57% and the Russell up 30 pts or 1.4%.

As I noted above – Investors/traders are focusing on the ongoing discussion surrounding a new batch of gov’t spending and as noted above the Dems have begun ‘unlocking the process’ known as reconciliation – this is a process that you will hear more about and it allows (the party in control) in this case – the Dems – to approve the $1.9 tril plan without any support from the Republicans in the Senate – and this is because the senate is split right down the middle – 50/50 with Kamala as the tie breaker…Capisce?  And then you had Treasury Secretary Janet Yellen – chiming in – telling us that the US ‘could return to full employment next year IF lawmakers pass Biden’s stimulus bill’.  (Wink, wink…)

And then if you add in the strong quarterly earnings reports that we have seen, it is like Christmas all over again…. Look – of the nearly 300 companies that have reported so far this season – 81% of them have beaten the estimates – that is a stat that is well ahead of the ‘average’ run rate which is more like 73%- 75% and so that is just another stat to support investors mindset.

10 Yr yields?  They are on the rise as well….by Friday afternoon – the yield was clocking in at 1.2% up from 1.16% earlier in the week.  Now look – this is a double-edged sword – rising yields typically suggest that the economy is improving (and that is good) but at some point, it creates a conundrum for investors and causes the markets to re-price – because rising yields offer an alternative to where investor has put their money …….so now we must ask – What yield is that?  Remember in early January – when the markets started to throw a tantrum….?   Remember the conversation about what yields were doing (rising) causing many to ask – What is the tipping point?  Is it 1.3%, 1.5%?  Take a stab at it, because there is no defined rate….it is whatever you think it is and thus you will manage your portfolio accordingly.  Expect to hear more about this in the coming weeks.  Stephen Weiss of CNBC’s halftime report suggested then that he thought 3% was the rate on the 10-year yield that would change mkt psyche – to which I said ‘Good luck with that’…. A mkt correction will happen well before the 10 yr hits 3%…. (Consensus appears to be between 1.5% – 2%). We will see….

Now this morning we wake up and continue to be amazed by Tom Brady – and his 7th Superbowl win and ring….and while the game was not what many expected – it is what it is….and so KC will have to wait until next season to try it again…. And not to be lost on the game – did you see the Robin Hood ad?  ‘We are all investors” – almost laughable…. Just fyi – serious investors are not using RH…. because once they realize that the process is more than just ‘a game’ – the money moves.  Remember – RH is an online broker not a wealth advisor, not a financial planner or a trusted advisor – they offer nothing more than access to the markets from you are your phone…. Period.

US futures are UP, Global markets are up, oil is up and 10 yr treasuries are up and the 30 yr treasury rose to its highest level in more than a year……suggesting that the pace of inflation is on track to accelerate….and this is another theme that will concern the markets…

Dow futures up 130 pts, the S&P’s up 15 pts, the Nasdaq up 59 pts and the Russell up 7 pts…. All the above plus the continued rollout of the vaccinations on top of data suggesting declining rates of infections and deaths in the US all helping the mood.

…. All is good in the world….no issues here…. Stocks around the world paying attention to what Janet Yellen said yesterday but will also begin to pay attention to what our old friend Larry Summers is not saying……Oh, you ask – What is he saying?  Well, he thinks the size of the relief package (on top of everything else) will risk sending inflation surging…. (there is that theme again….)  So – make sure you talk to your advisor at RH to create a plan…. Oh wait – There are not any advisors at RH – you are on your own…. Strap in….

European markets are up…. the Italians are celebrating the return of Uncle Mario Draghi…. Germans are expecting the latest industrial production numbers.  News that South Africa is halting the distribution of the Astra Zeneca vaccine is concerning markets a bit as it was determined that that vaccine offers little to no protection against the latest variant of COVID-19 19.  At 6:45 am the FTSE +1.04%, CAC 40 + 0.78%, DAX + 0.35%, EUROSTOXX + 0.55%, SPAIN +0.47% and ITALY +1.57%.

No eco data today…and we are in the last big week of earnings….so sit tight…. In addition, the Trump impeachment trial begins this week – so that is likely to provide some entertainment for the country and the world…but it will not drive the action in the mkts….no matter what happens.

And OIL keeps going higher as well……as OPEC makes it clear that they are sticking to their production cuts even as the world emerges from this crisis and demand is expected to soar….US WTI (West Tx Intermediate) is now trading at $57.54…while Brent Crude is now trading above $60/barrel.  Stronger crude prices are causing US producers to ramp up production….and the latest US rig count is now at its highest level since May…. suggesting that the big producers expect demand to surge…and that is also reflected in the price…. Capisce? We are now back in December 2019/January 2020 highs – I suspect that it will churn here, but if the demand story continues to build – then a pop would not be out of the question and that pop would take us to the Goldy summer target price of $65 – stay tuned.

Gold – which has been under pressure of late is rallying by $10 at $1,821/oz as it attempts to hold onto the $1800 level.   Look it has broken all trendline supports, tried to find support at $1830 and failed and then tested support at $1,795 ish…. The bounce is welcomed but another test lower that fails could take us back to the $1,700/$1,750 range….

Bitcoin is up $1600 at $39,450……

The S&P closed at 3886 – after testing a range of 3874/3894……And this morning it looks like it will kiss and pierce another new century – 3900!  And while I continue to be cautious – it is what it is….and if you are invested then you are enjoying the gains…and I would say – sit tight and stick to the plan, making investments regularly, but not chasing stocks on any one day….

We are in an upward channel bound by 3715 and 3900 – anywhere within that range would be considered normal….so do not stress……And while I did not see a breakout above 3900 – if everything stays the same this morning – we will certainly give it the ‘old college try’…..I still believe that we will see more backing and filling and that is ok…in fact, that would be welcomed.

Call me to discuss your portfolio.

Text INVEST to 21000 to get my digital business card – give me a call if you want to discuss what Slatestone can do for you.

Take good care.

Consultant, Market Strategist
kpolcari@slatestone.com

Carrot Souffle

Had this at a friend’s house on Saturday evening…. was so good, I had to have the recipe to share it with you.  It is so easy to make and has an almost ‘sweet potato pie’ consistency to it.  It is easy to make and a dish that will become a staple when you are looking to make something different.

For the souffle you need 1 lb. of carrots, 3 eggs, ½ c of white sugar, 3 tbsp of flour, 1 tsp of baking powder, 1 tsp of vanilla, 1 stick of melted butter, dash of nutmeg and cinnamon.

For the topping – ¼ c of corn flakes – crumbled, 3 tbsp of brown sugar, 2 tbsp of butter, ½ c of chopped walnuts (I imagine you can use candied pecans as well – would just make it a bit sweeter), and a dash of cinnamon.

Preheat oven to 350 degrees.

Boil the carrots until soft – add to the food processor and blend with the eggs.  Now add in the balance of the souffle ingredients.  – Blend well and then pour it into a lightly greased ½ q baking dish.

Now mix the ingredients for the topping – and spread it on top of the carrot souffle.

Bake for 45 mins uncovered.  Souffle is done when the mixture is firm.  So good.

Thanks to Susan for this delicious new side dish.