FOMC Day; Jamie Publishes His Letter – Try the Spaghetti Carbona w/Asparagus Tips

Kenny Polcari Uncategorized Leave a Comment

Things you need to know.

  • Markets digest the Monday surge.
  • Investors await today’s FED minutes – due out at 2 pm
  • Oil – churns around the trendline as summer approaches
  • Is Jamie Dimon setting the stage for earnings season?
  • Try the Spaghetti Carbonara with Asparagus Tips

**I am hosting my bi-weekly Blitzr Live event today at 4:45 pm – consider joining Ron Insana and me as we discuss the coming earnings season, the infrastructure plan, rising taxes and the latest Jamie Dimon Shareholder letter….  Click here to register for this free, interactive event.  https://blitzr.com/event/3653/2236
Stocks ended Tuesday a bit lower – after the big gains on Monday….and this should not be an issue at all.  In fact – the moves lower is irrelevant – I mean the Dow lost 96 pts or 0.30%, the S&Ps gave back 4 pts or 0.1%, the Nasdaq lost 7 pts or 0.05% and the Russell gave back 5 pts or 0.25%…these are nothing moves – in fact, I would say that yesterday was a non-event except maybe for Credit Suisse which is still reeling from latest headlines about their relationship with the now defunct Archegos Capital.

Management changes, dividend cuts, and cancellation of stock repurchases are only some of the issues that are swirling around this Swiss investment bank….and this story is still being written….Again, though, this is company specific and not a broader industry issue….and while other investment banks suffered – Credit Suisse appears to be the one that is getting hit the hardest…..Remember that Goldy and Morgan Stanley were the first ones out of the gate last week when they found out about the extent of the ‘disaster’ – the WSJ ran with the ‘Goldman sells $10.5 billion worth of stocks in block trades’ – which brings up a whole other issue about ‘what they knew’ and they did know a lot – so they were selling blocks of stock to buyers who did not know the extent of the disaster that was to come…..Capisce?  Just sayin’…. this is also sure to be another case study at HBS.

We also heard from the IMF – the Int’l Monetary Fund – and they are bullish on the global economy…. raising their estimates on global economic growth in 2021 from 5.5% to a record 6% and from 4.2% to 4.4% in 2022……citing massive global stimulus spending, the introduction of a handful of vaccines and the pace at which those vaccines are being injected into citizens of the world.  IMF Chief Economist Gita Gopinath telling reporters that –

“A way out of this health and economic crisis is increasingly visible.”

Look – the IMF estimates that US economic growth in 2021 will be 6.4% and 3.5% in 2022.   By contrast – the are estimating that China’s growth rate will be 8.4% in 2021 and 5.6% in 2022.  The Eurozone – which includes 19 countries that share the Euro – to be 4.4% and 3.8% in 2021 & 2022 respectively while Japan is expected to grow 3.3% and 2.5%.

She also makes it clear that the global recovery will be uneven – slower in poorer countries that cannot afford massive stimulus efforts and in those countries that are tourist dependent.  That is not new news at all….and she also predicts that many jobs that existed prior to the pandemic may never return – again – not new news.

She did point out that a quick recovery in the US could cause interest rates to rise in ‘unexpected ways’ – disrupting financial markets while punishing already hard-hit debt-ridden emerging markets. And this is also not new news but is once again a concern that many investors/analysts/strategists have been worried about.

Now – speaking of rising rates or in this case falling rates – the 10 yr. is now yielding 1.64% – down from last week’s 1.77% and that is helping to support the latest move higher in stocks. This morning yields are being quoted at 1.645% – right in line.

The VIX – fear index – continues to move lower – closing last night at 17.92 down 20 cts.  And this low level continues to suggest complete complacency by investors – so worries over rising rates or rising inflation once again appear to be on the back burner and this will continue to fuel the move higher for stocks – at least until next week when earnings season begins.

Recall – that earnings are expected to be robust – we know this – expect to see greater than 80% of public companies to ‘beat the estimates’ on both top and bottom lines…None of this should be a surprise at all – and so what will be important once again – is what the message is going to be…..

With Friday’s strong jobs number – the chatter now is that job growth will continue at breakneck speed so earnings estimates and revisions for the 2nd,  3rd and 4th quarters will need to ‘revised higher’ and this will only add to the excitement – especially if the message is delivered with confidence by the C suite.  Get ready – because I suspect that that is exactly what is going to happen…. we just must figure out what that means for valuations – which are currently running at 21.6 x forward earnings…well above the longer-term average of 15.9 x.  and with rates at zero and ‘no inflation’ that might work, but if that part of the story changes – then the whole thesis will have to change….

Jamie Dimon’s shareholder letter just came out – and it is VERY BULLISH…in it he outlines the banks views about nearly everything concerning stimulus, growth, US economic activity and our relationship with China.  He is bullish out through 2023!  He also opines on what China thinks of America – and they do not think very much…. Expect this 66-page shareholder letter to gather lots of attention…. Just fyi – JPM stock is up 23% ytd….it is consolidating between $145/$155 in what looks like a new breakout setting up!

This morning US futures are churning in line.  Nothing significant in either direction…. Investors waiting patiently for the FOMC (Federal Open Market Committee) minutes to be released at 2 pm.  Yawn……is anyone expecting a ‘bombshell’ announcement out of the FED?  Is anyone expecting them to reveal a change in course?  A pullback on stimulus?  Or a new assessment of the economy that suggests runaway inflation?  Hardly, but what they will do is dissect the statement ‘line by line’ looking for the slightest change of terminology or intent – because someone is always looking for that edge…. Do I think that is going to happen?  Nah…. I do not – but I am just one lone voice….

The other data point that is due out at 7 am is weekly mortgage apps – they have been running in the negative zone of late – will this week suggest something different?  Remember that 30 yr. rates are rising, so the cost of owning a home is up – just a bit, but it is up…and likely only going higher in the months ahead…which will also cool the red-hot housing market (maybe).

European markets are also doing nothing really…. but breathing…. They are digesting the latest IMF report while they await the US FED minutes.  In addition – Eurozone composite PMI rose to 53.2 up from 48.8 – taking that ‘economy’ from contraction to expansion.  As of 6:30 am – the FTSE + 0.68%, CAC 40 + 0.7%, DAX +0.01%, EUROSTOXX -0.19%, SPAIN -0.23% and ITALY -0.12%.

Oil – continues to churn around the trendline…. currently just below it but attempting to hang on…. the recent news surrounding increased output from OPEC and increased output from Iran putting some pressure prices – but this is – I think – short term. I continue to believe that demand will surge in the coming months and I continue to believe that we will remain in the $55/$65 range – but more likely $60/$65.

Bitcoin – is trading at $57,000.  Ethereum is trading at $2050.

The S&P closed at 4073…. after trading in a tight range of 4068/4086.  This morning futures are suggesting nothing really….S&P’s are up 2 pts….Again – the new trendline resistance suggest that 4086 should be some resistance, but if the FOMC mins do not reveal anything new and the Jamie Dimon shareholder letter gets air time and analysts start talking up earnings season – we could easily see investors/algo’s take the S&P to 4100 to test investor response…..I say – watch out….just be careful….

Remember – as a long-term investor – you need to eliminate the daily noise and focus on the plan.  Do not become emotional…. Take advantage of the move in prices to rebalance your portfolio so that you are not overexposed or out of balance – this will protect you.
Text INVEST to 21000 to get my digital business card – give me a call if you want to discuss what I can do for you.  You can now get a video version of this note on my IG (Instagram) feed – my handle is Kennyp1961 (https://www.instagram.com/kennyp1961/)
Take Good Care

Chief Market Strategist, Consultant
kpolcari@slatestone.com

Spaghetti Carbonara w/Asparagus Tips

Here is another great Springtime dish…. take the classic Pasta Carbonara and add in some steamed/crunchy asparagus.  Looks great on the plate and is pleasing to the eye and pallet.  Try this on a night when you can set the table outside, light the fire pit and listen to some Laura Pausini while entertaining your friends…. enjoy the night.

For this you need: 1/2 Pound Fresh Asparagus Spears, Diced Pancetta, Minced Garlic, 1/2 Cup White Wine, 2 Large Eggs, plus 2 Egg Yolks, s&p, Grated Parmigiana Cheese, Finely Chopped Fresh Parsley, 1 lb. of Spaghetti.

Begin by trimming asparagus, and cut into 2-inch pieces, Cut the white end of the stalk off and discard.  Blanch the asparagus in boiling water until tender crisp, then drop into a bowl of ice water. Do not overcook – you want the asparagus to be firm not limp.

In a saucepan, sauté the pancetta until crisp, now add the garlic. Sauté for about 3 mins…do not burn…. add the wine and cook until it has been almost completely absorbed.
In a bowl, beat together the eggs, yolks, grated cheese, pepper, and parsley.

Bring a lg pot of salted water to a rolling boil and add the spaghetti.  Cook for 8 – 10 mins or until “al dente”, then drain and return to the pot. – Reserve a mugful of the pasta water. Add back a bit to moisten…do not leave a puddle…. return to stove.

Now add the pancetta and asparagus to the pasta and cook over high heat for one minute to warm. -this will also help to absorb any water that is left.  Now add the egg mixture and stir continuously until the sauce completely coats the pasta.

Serve in individual warmed bowls, offering extra grated Pecorino cheese at the table for your guests.  Compliment with your favorite white wine…. Nothing too fruity.

Buon Appetito.