US market, has the Eagle landed "softly"? Rivian's a Buy?
US went through a week of labour, last week as all sorts of official reports relating to US labour market were released.
1. Jobs Opening and Labour Turnover surveys (JOLTs).
Job openings for October 2023, continued to decline, reaching the lowest level since August 2021.
The ratio of job openings to unemployed persons fell to 1.34, suggesting a slower pace of hiring.
This data supports the notion of a cooling labor market, potentially easing wage inflation pressures.
This is what the Fed would like to “see”.
(2) The ADP Employment report.
US Private sector employment increased by 103,000 jobs in November 2023, falling behind market expectations of 130,000 jobs (or by -27,000 jobs).
November 2023 data is also lower than revised October 2023 data of 106,000 jobs by -3,000 jobs.
This data points towards continued, albeit slower, job growth in the US economy.
Again, something that’s musical to the Fed’s ears.
(3) Challenger Job Cuts report.
Planned layoffs in November 2023, was 45,510 jobs lost.
It is an increased of 8,674 jobs lost or +23.55% when compared to October 2023.
Data suggests some companies are starting to adjust their workforce due to economic uncertainties.
(4) US Weekly Jobless Claims report.
US Weekly jobless claims rose by 1,000 claims (from the week before) to 220,000.
It is still coming in short of market expectations of 222,000 claims.
Data indicates a slight uptick in unemployment, but the overall level remains historically low.
(5) US Non Farm Payroll report.
US Nonfarm payroll employment for November 2023, increased by 199,000 jobs in November, exceeding expectations by 19,000 jobs.
It was also higher than October 2023 data by +49,000 jobs (or +32.67%)
Data suggests the labor market remains strong despite economic headwinds.
Summary of Labour reports.
Suffice to say, the above labor reports paint a mixed picture of the US labor market.
While the Fed is willing to witness declining job openings as a “tradeoff” to cool down the market, rising claims and jobs cut is suggesting strongly of US economy slowing down at the same time.
Has the Eagle (US economy) landed softly?
Whether these reports confirm a "soft landing" for the US economy remains to be seen.
This is because a soft landing entails a slowdown in economic growth without a recession.
Although November 2023 data is encouraging, it's important to note that these are single data points and should not be overemphasized.
Continuous monitoring of economic indicators is necessary in order to know (for yourself) when the US economy achieves a soft landing.
How to trade this week ?
Last week’s labour reports of mixed economic data would keep the market volatile this week.
Two reasons why market will remain “jittery” until Wed (13 Dec):
(1) Last FOMC meeting commences on Dec 12-13.
Market will be waiting anxiously until Wednesday, to see if Mr Powell will throw hints post FOMC press conference; on when the Fed would start to reduce interest rate.
(2) US Consumer Price Index (CPI) - Tue, 12 Dec 2023.
On the same day FOMC meeting starts, US inflation report will be out.
Wall Street’s forecast (see below)
Wall Street anticipates US’s November 2023 core CPI (Consumer Price Index) to register a 0.3% MoM increase. (see above).
This is the same rate as Wall Street’s October 2023 prediction.
FYI, US’s October 2023 actual inflation was 0.2%, -0.1% lower than prediction.
If November 2023 core inflation is 3% (as per Wall Street forecast), the result may cause “panic” selling.
Out of fear that (a) the Fed may hike interest rate or (b) keep interest rate elevated for an even longer time period.
What I will do on the run up to FOMC meeting:
Personally, I will keep my mind opened and observe the market for the next 3 days.
US pre-market indicators going into Monday, are reinforcing the same belief. (see below)
After Wed, 13 Dec 2023 2:30pm US time, everyone should have a better indication on how to trade for the rest of (a) the day and (b) the December month.
In the event that you cannot wait to invest in something, below is a recommendation from Stifel Financial Corp, Managing Director, Stephen Gengaro.
He is recommending US electric vehicle maker - $Rivian Automotive, Inc.(RIVN)$.
Below are 3 main factors why Mr Gengaro thinks Rivian has the potential.
(1) Brand Awareness and Partnerships:
Stifel highlights Rivian’s increasing brand awareness as a significant strength.
The company has garnered attention and recognition in the EV market.
Additionally, Rivian has forged strategic partnerships, including a notable agreement with $Amazon.com(AMZN)$.
The partnership not only (a) boosts Rivian’s credibility but also (b) opens avenues for commercial electric vehicle sales to other fleets.
(2) Deal with Amazon and Commercial EV Sales:
The Nasdaq-listed firm has an EDV (Electric Delivery Vehicle) agreement with Amazon.
This collaboration positions Rivian as a key player in the rapidly growing delivery and logistics sector.
Stifel is confident that Rivian will continue to sell its commercial electric vehicles to other fleets, further bolstering its revenue prospects.
(3) Rivian’s Upcoming R2 Line:
Stifel is constructive about Rivian’s R2 line, which is expected to launch in 2026.
The factory facility is projected to have the capacity to produce 400,000 units annually.
The R2 line primarily targets the largest US EV segment, currently dominated by Tesla Inc.
Rivian’s entry into this competitive space is seen as a positive move.
Rivian - 2023 YTD performance
Rivian is registering a +9.80% to its YTD performance.
It hit bottom on 25 April 2023 at $12.00.
It is currently trading at $19.04 per share.
Stifel believes there’s room for further growth, projecting a +21% upside with a price target of $23.
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