To The Moon

Stocks rose Tue, 28 Nov 2023 as Fed officials socialization began making its round in the media; raising hopes that the central bank may not need to raise interest rates further. (see below)

• Fed Governor Christopher Waller said he is “increasingly confident that policy is well positioned to slow the economy and get inflation back to 2%”

• Waller added that he could see a point where the Fed might start lowering rates if inflation continues to ease over the next 3 to 5 months.

• Fed official Michelle Bowman speech at Salt Lake City, Utah was “darker” in tone.

• She said “ …. we will need to increase the federal funds rate further to keep policy sufficiently restrictive to bring inflation down to our 2 per cent target in a timely way”.

• However, she did buffer it with “However, monetary policy is not on a preset course, and I will continue to closely watch the incoming data as I assess the implications for the economic outlook and the appropriate path of monetary policy”. 

When US market closed on Tuesday late afternoon:

• $DJIA(.DJI)$ : +0.24% (+83.51 to 35,416.98).

• $S&P 500(.SPX)$ : +0.10% (+4.46 to 4,554.89).

• $NASDAQ(.IXIC)$ : +0.29% (+40.73 to 14,281.76).

It helped too that US official report - US Consumer Confidence index reported a favourable data set for October 2023. (see below)

US Consumers Confidence index for October 2023

• The Conference Board Consumer Confidence Index® increased in November 2023 to 102.0 (1985=100), up from a downwardly revised 99.1 in October.

• The index bounces back after 3 straight monthly declines, as expectations turn less gloomy. (see below)

• Above is the “lesser known” cousin report to the US Consumer Confidence index report.

• The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—rose to 77.8 (1985=100) in November, up from its downwardly revised reading of 72.7 in October.

• Despite this month’s improvement, the Expectations Index remains < 80 for a 3rd consecutive month—a level that historically signals a recession within the next year.

• Although, consumer fears of an impending recession abated slightly—to the lowest levels seen this year—around two-thirds of consumers surveyed in November still perceive a recession to be “somewhat” or “very likely” to occur over the next 12 months.

Overall, the Consumer Confidence report could be regarded a “positive” note.

In the midst of a largely positive US market sentiments, where to park your hard-earned monies?

While the Magnificent 7 or the FAANG are still US holy shrine stocks, I believe now is not really the time to plonk more money into them, for the simple argument that they have risen quite a fair bit YTD. (see below)

Continue to monitor these lovelies from afar (for now!)

What would I be looking at?

For me personally, I am looking out for opportunities in Energy stocks. (see below) and in particular $Occidental(OXY)$ (see below)

• The OPEC+ meeting that was supposed to take place last Sunday, 26 Nov 2023 has been postponed to this Thu, 30 Nov 2023.

• It is a clear signal that things are not looking good down yonder amongst the OPEC+ members.

• Speculations in the rumour mill is that members are not seeing eye-to-eye amid a quota disagreement between some producers countries.

• Some analysts expressed that they expect OPEC+ to extend or even deepen supply cuts into next year.

• This is so, in order to support prices that on Mon, 27 Nov 2023 were trading just above $80 a barrel , down from near $98 in late September 2023.

• An OPEC+ source said he expected there to be an option for a "collective further reduction" on Thursday, without providing details.

• Earlier in November, another OPEC+ source said the group was set to consider additional cuts.

• OPEC and allies led by Russia, (known as OPEC+), will begin its online meetings to decide oil output levels at 1300 GMT on Thursday.

• Occidental Petroleum registered a -1.62% (or -$0.99) decline for its YTD performance.

• This energy stock has reported a stellar set of data for its Q3 2023 earnings reporting.

• Total revenues came in at $7.4 Billion versus market expectations of 7.195 Billion. exceeding it by +2.8%.

• Earnings per share (EPS) was $1.18 per share versus market expectations of $0.89, exceeding it by +32.58%. This also marked OXY’s first positive EPS after 3 consecutive quarter of negative EPS. (see below)

Incidentally, Occidental Petroleum is Warren Buffett’s ranked #3 US stock by size. (see below) Need I elaborate more?

• Do you think US market will continue to rise today?

• Do you think it is prudent to look at Energy stocks now in preparation for a price hike?

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