To The Moon

Public Holidays

There are no public holidays for Singapore, Hong Kong, China and the USA in the coming week.

Economic Calendar (08 Jan 2024)

Notable Highlights

• CPI data should be hogging the headlines in the coming week as a key consideration for the Fed coming interest rate. CPI is a reflection of inflation in the economy. If the inflation proves to be stubborn, the plans for a Fed pivot can be delayed.

• 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.

• PPI can be seen as a prequel of inflation that affects the producer first before these are passed on to the consumers.

Earnings Calendar (08Jan 2024)

In the coming week, a few earnings of interest include Delta, Bank of America, BlackRock and Wells Fargo.

Let us look at Delta in detail.

The above is the 1-year chart of Delta that is currently trending down since Dec 2023.

Delta had a great year in 2022 after clocking an annual revenue of over $50B and a $3.537B operating profit.

With a 10-year median margin of 21.3% for gross profit, 9.1% for pre-tax income and 4.7% FCF, Delta looks to be managing well.

The price grew 15.04% from a year ago.

For the coming earnings, Delta has a forecast of 1.16 and $13.56B for its EPS and revenue respectively. Can Delta’s stock soar following its earnings?

Market Outlook - 08 Jan 2024

Technical observations of the S&P500 1D chart:

• The Stochastic indicator is showing a downtrend, approaching the oversold region 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). 2 of the 3 EMA lines have touched and thus, the current uptrend may change soon. Once, all 3 lines converged, a new downtrend would be confirmed.

From the 1D technical indicators above, there are a total of 8 (Buy), 13 (Sell) and 0 (Neutral). Investing recommends the “SELL” recommendation based on the technical indicators above (1D chart for S&P500).

From the data above, the market should see a decline in the coming week though ranging sideways is possible.

News and my thoughts from the last week (08 Jan 2024)

• Maersk pauses Red Sea sailings after Houthi attack on container ship - Reuters

• Capital Economics, for its part, predicts another $480 billion wipeout in commercial real estate values next year, and another $120 billion loss in 2025, for a 24% peak-to-trough value decline. - Fortune

• (Berkshire) purchase of more than $700 million in DR Horton stock in the spring, as well as another $100 million in Lennar Corp. and NVR Corp. - Yahoo Finance

• And according to real estate mogul Grant Cardone, the slump is just getting started. - Yahoo Finance

• Let's keep a look out for the banking sector, CRE and the sales of US treasury bonds and bills. These are important references for us all. Add Logistics Manager index LMI, Leading Economic Indicators LEI, the debts from consumers, corporations and the federal government. We could get a good set of warning lights. No concern if there is great value being created.

• BRICS welcomed new members of UAE, Saudi Arabia, Ethiopia, Egypt and Iran. Is there a new trading bloc being formed?

• Fortitude is the strength and firmness of mind; resolute endurance; the strength to bear misfortune, pain, calmly and patiently; a firm courage; the mental and emotional strength to face difficulty, adversity, danger, or temptation courageously. Fortitude could be needed for 2024. Let us continue to do our best.

• Saudi Arabia’s Public Investment Fund (PIF) emerged as the world’s most active sovereign investor last year, boosting its deal activity even as most global peers including GIC and Temasek Holdings slashed spending. - Asian Investor

Chinese electric vehicles are making their way into global markets and soon will practically surround the United States and Canada, according to an AutoForecast Solutions special report in September, “Cars from China are Coming.”

• The next country to look out for in North America is Mexico.

• Some of the best things take time.

• More than half of Americans earning over $100,000 a year live paycheck to paycheck. So what’s going on? - CNBC

• 15% of Americans with student loans are behind on their payments, putting them at risk of accumulating interest & lowering their credit scores.

  Those with lower incomes & less education are more likely to be behind on their payments. - Fool

• The US lags behind other top countries in its proportion of manufacturing value added to GDP, World Bank data reveals - SSTI

• Would de-globalization, the decay of the US's global stature, and de-dollarization be the legacy of President Biden?

• Xerox to lay off 15% of its workforce - CNBC

• The US government’s debt has topped $34 trillion for the first time, just weeks ahead of deadlines for Congress to agree to new federal funding plans. Is this even an issue? - CNN

• Credit card balances in the US increased by about 4.7% to $48 billion in the third quarter, pushing the total to $1.08 trillion, according to New York Federal Reserve data — the highest total in data going back to 2003. The average credit card interest rate in America today is 24.59% — the highest since LendingTree began tracking rates monthly in 2019. - LendingTree

• The United States is now the world’s LNG exporter, after overtaking Australia and Qatar, according to new data compiled and shared by Bloomberg on Tuesday. - OilPrice

• U.S. energy giant ExxonMobil Corp (XOM.N) has formally exited the West Qurna 1 oilfield in southern Iraq and handed over its operations to PetroChina as lead contractor, a deputy oil minister told Reuters on Monday - Reuters

• DENMARK’S Maersk & German rival Hapag-Lloyd said on Jan 2 that their container ships would continue to avoid the Red Sea route that gives access to the Suez Canal following a weekend attack on one of Maersk’s vessels. - BusinessTimes

• $112 billion. That's how much the office of Federal Student Aid provides in grant, work study and loans each year. - Forbes

• Driven by serious government funding, China is predicted to lead the world in expanding semiconductor production, with a total of 18 new fabs expected to begin production in 2024. - TomsHardware

• In total, the economy added about 2.7 million jobs over the course of 2023, down from 4.8 million in 2022. - Fox Business

My investing muse

2023 Market Roundup

2023 markets roundup. What are the top-performing asset classes? All asset classes seem to do well except for Crude oil (down 11.5%), Chinese equities (down 12.5%), and commodities (down 12.2%).

Interestingly, the top-performing asset classes include Japanese equities (up 30.1%) US large cap (up 24.2%), and European equities (up 17.3%). Is it time for us to consider Japanese and European equities?

Here are the best-performing sectors of 2023—and the ones that fell behind—in a year defined by AI, high-interest rates, and resilience. The top losers from 2023 are utilities, consumer defensive, vaccine makers, oil & gas exploration and agricultural inputs.

Both charts above are from Visual Capitalist. Please refer to their websites for more such charts and details.

S&P500 EPS Outlook (Q4/2023 earnings)

Analysts lowered Q4 EPS estimates for $SPX companies in 9 of 11 sectors during the 4th quarter, led by the Health Care (-21%) sector. - FactSet

Does this mean that most are not going to make profits? Not necessary. But more sectors can expect lesser profits from the coming Q4 earnings. It will be interesting to see how the market reacts to the earnings.

Conclusion

The market ended 2023 on a high and it is not surprising that there have been some profit-taking during the past week. What is interesting is the market's price and the value it has created. The price always converges with its value at some points. If the price is much different from its value, we can expect corrections to happen over time as the market corrects itself.

We should expect some of the earnings to remain strong. I have concerns about commercial real estate (CRE), banking and debts. US officials have been talking up a soft landing. I think that time will be the best judge of these.

Let us look forward to another earnings season. I recommend some hedging and avoiding leverage. Is it time for us to consider other asset classes like Japanese equities?

@TigerStars

$Delta Air Lines(DAL)$

$S&P 500(.SPX)$