Public Holidays
There are no public holidays for Singapore, Hong Kong, and China in the coming week.
15 Jan 2024 (Monday). It is a public holiday in the USA as they celebrate Martin Luther King Jr Day.
Economic Calendar (15 Jan 2024)
Notable Highlights
Retail Sales. This should capture the Christmas spending spree. Being seasonal, this may not truly reflect retail consumption as a monthly average.
Philadelphia Fed Manufacturing Index reveals the manufacturing activity in Philadelphia.
Existing Home Sales. This report reflects the strength of the U.S. housing market and can be seen as a key indicator of overall economic strength.
GDP. China’s GDP will be revealed. This can cast some light on global consumption as China remains one of the key manufacturers in the world.
Initial Jobless Claims - This reflects the impact of unemployment, a data point for the Fed’s interest rate decision.
Crude Oil Inventories can be seen as forward indicators of market demand and consumption. If the trend of excess inventories continues, this is demand erosion that can lead to reduced production & weakening consumer spending.
Earnings Calendar (15Jan 2024)
There are a few earnings of interest, especially for the banking sector. Some of the earnings of interest for the week starting 15 Jan 2024 include Goldman Sachs, Morgan Stanley, Charles Schwab, Prologis, and State Street.
Let us look at Goldman Sachs’ recent performance. This is taken from Macrotrends.
Observations:
Good growth in revenue from $32.7B (2017) to $47.3B (2022)
Good growth in net income from $3.6B (2017) to $13.4B (2022). However, the best year saw a yield of $27B in 2021.
There is a steady build-up of assets with over $1.4T (as at end of 2022). Likewise, there is also a growth of liabilities to $1.3T as of the end of 2022.
The stock has grown by 2.11% from a year ago.
Investing has a recommendation of a “strong buy” for the stock.
For the coming earnings, the forecast of the EPS and revenue are 4.5 and $11.06B respectively.
Can Goldman continue to grow following its earnings?
Market Outlook - 15 Jan 2024
Technical observations of the S&P500 1D chart:
The Stochastic indicator is showing an uptrend with a potential top crossover soon.
The MACD indicator is on a downtrend.
Moving Averages (MA). Both the MA50 line and the MA200 line are on an uptrend. The last candle is above both the MA 50 line and the MA 200 line. Thus, it could be read as bullish for the long-term and mid-term.
Exponential Moving Averages (EMA). The 3 EMA lines are moving in a fanned-out pattern, thus implying an uptrend. Once, all 3 lines converged, a new downtrend would be confirmed.
From the 1D technical indicators above, there are a total of 22 (Buy), 0 (Sell) and 0 (Neutral). Investing recommends the “STRONG BUY” recommendation based on the technical indicators above (1D chart for S&P500).
From the data above, the market should have an uptrend in the coming days.
News and my thoughts from the last week (15 Jan 2024) - BTFP, defaults, Microsoft and Apple.
Savings are the first step towards wealth accumulation. Savings should not be what we are left with at the end of the month but what we set aside when we first receive our income.
BTFP is shrinking. Is this good news? As of November 30, 2023, the total outstanding amount of all advances under the BTFP was $114,041,296,000. As of October 31, 2023, the total outstanding amount of all advances under the BTFP was $120,605,902,000
Non-performing loans are expected to have risen to a combined $24.4bn in the last three months of 2023 at the four largest US lenders: JPMorgan Chase, Bank of America, Wells Fargo and Citigroup - FT
FedEx Corp. expects its air express unit will lose half of its business with the U.S. Postal Service when an existing contract expires, making more pilots expendable, FreightWaves has learned.
Tightening fleet capacity, lingering geopolitical conflicts and robust US crude exports are expected to boost tanker freight in 2024 despite ongoing OPEC+ supply cuts and a possible slowdown in oil demand growth. - SP Global
The share of credit card holders that carry a balance has increased to 49% — up from 39% in 2021, according to Bankrate’s survey of 2,350 U.S. adults conducted in late November - CNBC
Revenue of TSMC in the final three months of last year came in at T$625.5 billion ($20.10 billion), according to Reuters calculations, compared with $19.93 billion in the year-ago period. - Yahoo Finance
Lebow says the declining condo values and high-interest rates are making it difficult for people to finance and close on deals. In some cases, the unit has lost so much value they now can't afford a mortgage. - CBC
Apple's iPhone sales in China were down more than 30% year over year for the first week of the year. The analysts said they believe Apple's iPhone volume will fall by double digits this year in China. What are the reasons leading the drop? - CNBC
Microsoft will become the most valuable company in the world. Apple looks to be dethroned after reigning for years.
*U.S CPI 0.3% M/M, EXP. 0.2% *U.S. CPI CORE 0.3% M/M, EXP. 0.3% - Investing
What is the impact of Cryptocurrency on global currencies like USD?
Tesla to Pause Production at Berlin Factory Due to Supply Chain Problems - Oil Price
For the first 3 months of the 2024 fiscal year that started Oct. 1, the federal deficit reached $510 billion, up $89 billion, or 21% from the year-ago period. Outlays rose 12% to $1.618 trillion, while receipts rose 8% to $1.108 trillion. - Reuters
The junk bond market has become “complacent” over the risks facing corporate America after a sharp drop in debt funding costs, with high-interest rates and a possible economic downturn still posing a threat. - FT
Debt-laden Vedanta Resources Ltd. has been downgraded to selective default by S&P Global Ratings after the miner concluded a deal with creditors. Is this merely delaying the eventual or a possible turnaround play? - Yahoo Finance
My investing muse
Layoff & related news
The following are some of the layoff news from the last week till 13 Jan 2023:
JPMorgan quietly cut 500 people from its investment bank before Christmas - Efinancialcareers
Instagram has cut 60 technical program manager positions, eliminating a layer of management at the company, according to a new report from The Information - Techcrunch
Citigroup to cut 20,000 jobs, take up to $1 billion charge as CEO Jane Fraser vows ‘2024 will be a turning point’ - Fortune
BlackRock said it will cut about 3% of its current workforce, though it expects to have a larger headcount by the end of 2024. The job cuts would amount to roughly 600 positions based on BlackRock's workforce at the end of December 2022 - Yahoo Finance
Flexe is trimming its headcount again in another round of layoffs, about 38% of its workforce. A new filing from the Washington State Worker Adjustment and Retraining Notification (WARN) system revealed 99 affected workers. - Geekwire
Unity Software said Monday that it would lay off about 1,800 employees, or 25% of its overall workforce, as part of a corporate restructuring plan. - CNBC
Barclays slashed its workforce by around 5,000 jobs in 2023 as part of a major cost-cutting drive announced last year, the bank said on Monday. - CNBC
The latest jobs report from the US Department of Labor showed nearly 8.4 million people had multiple jobs in October. That's the highest number since the start of the pandemic. - CBS News
Amazon's live streaming site Twitch is poised to cut 35% of its staff, or about 500 workers, according to sources familiar with the plans, the latest in a series of job reductions there. - Business Times
Commercial Real Estate (CRE)
Image
San Francisco. A hotel has defaulted on its mortgage.
This may be the sharpest plunge in value for a commercial real estate building in recent years. A 339k sq ft office tower in the Washington DC area (Bethesda) just sold for $30 million or $88 per SF. The seller acquired the building for $134 million in 2019, taking a ~80% haircut in 4 yrs. But this isn't the worst of it. The seller also spent $21 million renovating the building during their ownership. It will be interesting to see how much worse the US office meltdown gets but it's certainly one of the biggest stories to keep an eye on in 2024 - Twitter user Triple Net Investor
The office vacancy rate in & around downtown San Francisco continued to creep upward to a new record high in the fourth quarter of 2023, according to CBRE. The City’s core business areas into new territory as the vacancy rate hit 35.6%. - SF Examiner
Moody’s Analytics, as reported by the Wall Street Journal, says 19.6% of the office space across the United States is now empty—the highest level since 1979, when Moody’s began tracking the statistic. The number is up from 18.8% a year ago. - Yahoo Finance
CRE seems to have more weaknesses and could be a prime candidate to lead the economy into recession. For there to be price inelasticity, commercial real estate should fluctuate around 5%. With a national average of almost 20%, this implies that buyers have more bargaining power. With San Francisco city core business areas hitting a vacancy of 35.6%, it is not good news for other commercial properties. This implies a good drop in people in the area, thus, affecting both private business and public services like public transport and more.
Conclusion
The S&P500 could be heading for new highs and this can happen soon. Let us keep a close look at both unemployment and CRE. Unemployment (with GDP & inflation data) is a part of essential data that paints the macro outlook.
It seems that some of the companies have cast a bright outlook for 2024. Some others have provided a more gloomy outlook. The coming earnings will be able to shed more light on the market and outlook.
Let us consider hedging as the earnings season begins. The Magnificent 7 has driven much of the growth in the S&P500. Thus, their coming earnings would be important barometers on the market outlook.
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