To The Moon

Public Holidays

Singapore celebrates Eid al-Fitr (Hari Raya Puaa) on 10 Apr 2024 (Wed).

There are no public holidays in Hong Kong, China and America in the coming week.

Economic Calendar (08 Apr 2024)

Notable Highlights

• The most watched data in the coming week from the economic calendar will be CPI. The CPI is also known as the inflation indicator. A forecast of 3.4% CPI year on year is on the cards. Should the figure turn out to be higher, the market is expected to turn bearish and vice versa.

• There will be updates of 10-year note auctions and 30-year bond auctions. These are part of the Federal Reserve funding the spending deficit.

• Initial jobless claims will also be a key macro data that the Federal Reserve will look into as they ponder the next interest rate decision

• Crude Oil Inventories can be seen as forward indicators of market demand and consumption. If the trend of excess inventories continues, demand erosion can lead to reduced production & weakening consumer spending.

Earnings Calendar (08 Apr 2024)

There are a few earnings of interest this week namely Delta, Citi, State Street, and BlackRock.

The earnings season continues for Q1 of 2024 quarter, with the banking sectors leading the way.

Let us look at BlackRock in detail.

Observations:

• The revenue of the company grew from $11 billion in 2014 to $17.8 billion in the year 2023.

• Gross profit grew from $6 billion in 2014 to $8.6 billion in 2023

• Operating profit grew from $4.5 billion in 2014 to $6.3 billion in 2023. Though it is not the record operating profit in 2021 common it remains a highly profitable operating margin that last ended at 35.5% in 2023.

• The free cash flow (FCF) 10-year median margin stands at a strong 32.8%.

• The gross profit margin stands at 50.7% from 10-year median.

• At the price-earning (P/E) ratio of 21.4, Black Rock looks to be of good value.

The stock price has been ranging close to the 52-week high.

The stock price has gained 21.5% from a year ago.

EPS stands at 36.85 and the dividend yield is 2.58%.

Investing has recommended a strong sell rating for the stock.

For the coming earnings on the 12th of April 2024, the forecast for the EPS and revenue stands at 9.16 and $4.67 billion respectively.

Will Black Rock continue to range near the 52-week high or will there be a drop in the price as per forecast by investing?

Market Outlook of S&P500 - 08Apr24

Technical observations of the S&P500 1D chart:

• The MACD indicator is showing a downtrend from the past week and this should continue into the coming week.

• Chaikin Money Flow (CMF) has hit below the zero line. This can be seen as a bearish signal with more selling volume.

Interpretation of CMF from the CFI website:

When there is a continuous buying period (when the CMF value is sustained above zero), the trend is considered bullish and indicates that price will continue to rise with the trend. When there is continuous selling pressure (CMF value below zero), this points to a bearish trend, indicating price will continue downward.Higher readings, either positive or negative, indicate a stronger trend. Increasing readings indicate gaining momentum.Crosses may be bullish or bearish. Bullish crosses occur when the CMF crosses the zero line from below, and stock prices continue on an upward trend. Bearish crosses occur when the CMF crosses the zero line from above, and prices continue to fall.

• 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 starting to converge. This implies a coming reversal of the current uptrend. However, this is yet to be completed until all 3 EMA lines have crossed and commence a downward pattern.

• I have replaced Stochastic with CMF to incorporate consideration of volume. Stochastic and MACD are similar with Stochastic being “more active” and more capable for “false” signals.

From the technical indicators, 4 indicate a buy rating, 4 indicate a neutral rating and 3 indicate a sell rating.

For the moving averages, 11 points to a buy rating and one point to a sell rating.

In total, 11 indicators recommend a buy rating, four are neutral and four recommend a sell rating. The overall rating for the S&P 500 from Investing points to a strong buy rating.

In conclusion, the S&P 500 should be trending down in the coming week. There are important macro and economic news that will be released in the coming week. There are some concerns about the Fed pivot with the strong jobs data and the risk of further escalation in the Middle East.

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

• Can America afford another war front or fund another war? Will the USA run out of both money and bullets? Are there sufficient arms left for defence?

• Should there be an international or local authority that monitors the development of AI and requires AI solutions with decision-making automation to have identification so that we can establish ownership and accountability?

• In the world of AI, he/she who controls the algorithm controls the world

• 12% of the world tries to define a view of China through their media. China is here as a global power and there is no stopping them. I hope that we can mix our opinions with travel.

• With working from home, the impact will spill over from commercial real estate (CRE) to retail, F&B and even city services. Let us monitor.

• GDP growth, a strong job market, improved production (PMI), and increasing logistics activities are good, if these are not funded by debts. Can the sales reach in time to save? We should know in the coming months.

• When debts start to default, would it be a stampede or a gradual erosion? Consider some hedging.

• Since the beginning of 2023, the final US non-farm payroll number has been downgraded from the first estimate seven times. The January jobs figure was cut by 124,000 a month later to a more modest 229,000. - FT

• Lithium iron phosphate (LFP) batteries are increasingly recognized for their superior safety features in various applications. While not completely immune to hazards, their exceptional thermal stability makes them the preferred choice. - Y Tech

• During a downturn, wealth is not lost, just re-distributed.

  What can we do to enjoy some of the re-distribution? Will we be surprised if the rich get richer and the poor get poorer?

• Entertainment could be one of the first affected sectors during a downturn. So let's monitor.

• China is going to be at the forefront of AI.

My Investing Muse ( 08Apr24)

Layoffs news

• Global management consulting firm McKinsey has offered to pay hundreds of senior employees to voluntarily leave the company and look for other jobs. UK managers were given the option for a 9-month job search period. - India Today

• Citigroup will lay off 430 employees across different divisions in New York, the bank disclosed in filings with the State Department of Labor on Monday. - Reuters

• A 70-year-old California-based less-than-truckload carrier Tony's Express ceased operations Thursday, leaving over 200 truck drivers, warehouse workers and office personnel without jobs, paychecks and paid time off (PTO). - FreightWavew

We continue to learn of more layoff news in the past week and we can expect more to follow in the coming weeks.

Baltimore Bridge Tragedy

It is estimated that the current claims and damages at the Baltimore Bridge tragedy could cost approximately $5 billion. There needs to be other workarounds for shipping routes and supply chain operations. With 8,000 workers affected by this accident, the government needs to clear the accident site so that work can resume for the port.

Minimum Wage

The new $20 minimum wage for fast food workers in California is set to start Monday as per AP News. Is this why inflation should continue to climb in the coming days?

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Several states have already increased their minimum on 1st Jan 2024. More will be announced soon. California starts with a new minimum wage on 1st April 2024.

When one sector enjoys pay increments, others would demand likewise. Wage demand spirals from envy, need, want or a mixture of factors. Inflation should flex soon with the Middle East tension sending oil prices up. What use if there is more pay without more value?

ADP shows the median year-over-year pay increase for job switchers was 10% in March, the highest rate of growth since July 2023. Meanwhile, job stayers saw an annual wage gain of 5.1% during the month. - Yahoo Finance

Chipotle’s chief financial officer estimated that the burrito chain would boost prices by “a mid-to-high single-digit” percentage as a result. “We are definitely going to pass this on.” - Yahoo Finance

This could lead to a series of wage adjustments. This would be inflationary in impact. With each such increase in pay, the Federal Reserve may need to review the interest adjustments. While the market hopes for a Fed pivot, there are concerns that inflation and wage increases need to be met with interest rate hikes instead.

Fed Fund Rates

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Relationship between interest rate and recession. From recent history, a recession can take place after a Fed pivot.

Conclusion

With Iran and Israel having more tension in the Middle East, the price of crude oil surges. Some analysts mentioned the possibility of crude oil hitting $100 per barrel. This should lead to more inflationary pressures.

With the CPI data release in the coming week, there could be more volatility in the market. Let us consider some hedging as we head into the Q1/2024 earnings season.

@TigerStars

$S&P 500(.SPX)$

$BlackRock(BLK)$

$Wells Fargo(WFC)$