To The Moon

Public Holidays

America, Hong Kong, Singapore and China do not have public holidays in the coming week.

Economic Calendar (15Jul24)

Notable Highlights

• China’s GDP will be released in the coming week. This is an important reference for global consumption as China is one of the important global factories. If the result comes out lower than the 5.1% forecast, it could be bearish for the market.

• Core Retail Sales and Retail Sales update will be released in the coming week. This speaks of the consumption in the USA. The USA is largely a consumer economy and a lesser than expected retail sales could bring some bearish impact.

• Philadelphia Fed Manufacturing Index brings some understanding to the manufacturing sector. This is a prelude to the coming consumption.

• Initial jobless claims will also be 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 (15Jul24)

Q3/2024 starts and a few earnings are coming in the coming week.

There are a few earnings of interest: Goldman Sachs, BlackRock, Bank of America, ASML, United, TSMC, Nokia, Netflix, Intuitive Surgical and American Express.

Let us look at BlackRock in detail.

Observations:

• Revenue grew from $11.08B (2014) to $17.8B (2023)

• Operating Profit grew from $4.52B (2014) to $6.33B (2023)

• EPS grew from $19.17 (2014) to $36.51 (2023). The year with the best EPS is $38.22 (2021).

• Dividend per share grew from $7.72 (2014) to $20.00 (2023).

Here is some recent news about BlackRock, listing their recent acquisition. At the same time, BlackRock is also in the Bitcoin sector, which has great potential.

For the coming earnings, the forecast is $10.04 and $4.85B for EPS and Revenue respectively. We can expect BlackRock to have a commanding share in the market.

Market Outlook of S&P500 - 15Jul24

Observations:

• The MACD indicator has completed a bullish top crossover that implies a current “bull” run.

• Chaikin Money Flow (CMF) is above the zero line in the middle which implies an uptrend. This remains in the bullish region. Note the selling strength is gaining ground.

• 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 the mid-term.

• Exponential Moving Averages (EMA). The 3 EMA lines are on an uptrend.

• 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.

S&P500 continues a strong uptrend coming into this week. Technically, it looks to be a “strong buy”.

Using 21 technical indicators, they largely point to a “Strong Buy” with 20 showing a “buy” rating and 1 showing a “sell” rating.

However, 2 indicators show “overbought, " implying a coming reversal.

In my opinion, the S&P500 should remain in a “short” uptrend. Let us monitor for now.

News and my thoughts from the last week (15Jul24)

• Bubbles pop.

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There was an assassination attempt on Trump. How would the market react on Monday?

• The jump in PPI appears to be an unwelcome development for the US economy and the fight to rein in high inflation after the BLS announced that consumer prices fell every month for the first time in four years. - CNN

• Elon Musk has said: The European Commission offered 𝕏 an illegal secret deal: if we quietly censored speech without telling anyone, they would not fine us. The other platforms accepted that deal. 𝕏 did not. - Elon Musk

• Russia's GDP grew by 5% in the first five months of this year, despite US sanctions. - BRICS News

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The growth of the S&P500 equal weighted is much lesser than the growth of the S&P500 - driven by heavyweights like The Magnificent Seven. Volatility with the S&P500 will be affected by the Mag7.

• Voting along party lines is a good basis to start. Voting as a citizen for the best of the land, over any political leaning is invaluable. America, we wish you the best. Let's have more collaboration and less sanctions.

• Elon Musk has donated to a super political action committee working to elect Donald Trump to the White House, per Bloomberg. Musk has contributed to a low-profile group called America PAC. It’s unclear how much Musk has given. - Unusual Whales

• With technologies and innovations, should we expect a deflationary impact? The cost of living continues to rise. To a citizen, the returns from AI & innovations have not helped to ease the cost of living. Is it just corporate greed?

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Annualized interest payments on US federal debt just reached an all-time high of $1.14 trillion. This is more than DOUBLE the amount of interest recorded in 2022 when the Fed started raising rates. To put this into perspective, even during the 2008 Financial Crisis, annual interest costs were ~$450 billion, or 60% lower. As a % of GDP, net interest cost this year is on track to exceed the 1980s high of 3.2%. By comparison, during World War II, net interest expense as a % of GDP was much lower, at 1.8%. The US government needs lower interest rates more than anyone. - X user, The Kobeissi Letter

• Ukrainian President Zelensky calls on NATO to drop all limits on striking Russia.

• A potential wave of strikes on the US East Coast this autumn where dockworker contract negotiations are stalling could be a “major wildcard” triggering another round of increases. - Splash247

• AMERICANS WITH ADJUSTABLE MORTGAGES COULD SOON SEE THEIR PAYMENTS SKYROCKET (Fox News) A small group of Americans who took out cheaper but riskier mortgages several years ago are about to see their monthly payments skyrocket. Since 2019, more than 1.7 million homes have been bought using adjustable rate mortgages (ARMs), which initially offer a lower, more affordable interest rate than their fixed-rate counterparts. But eventually, ARMs reset to an unknown future rate, meaning there is a high degree of uncertainty for individuals who take on these types of loans. - MSN

• Governments worldwide owe an unprecedented $91 trillion, an amount almost equal to the size of the global economy and one that will ultimately exact a heavy toll on their populations, per CNN.

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Americans' pandemic savings are gone, per Bloomberg.

• US commercial property crash is set to deepen the pain elsewhere Almost US$1 trillion of debt linked to commercial real estate will mature this year in the US - The Business Times

• “It’s time to cut rates,” said Joe Brusuelas, RSM. “Inflation is fading as the primary focus of concern. The balance of risks is slowly tipping towards higher unemployment.” Interest rate cuts can spiral inflation. - CNN

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The 3-month correlation between S&P 500 returns and the number of S&P 500 stocks advancing dropped to the LOWEST on record. It means that the number of stocks driving gains is the smallest EVER. Notably, 40% of S&P 500 stocks are down year-to-date.

A line chart that displays the U.S. office vacancy rate from Q1 2000 to Q2 2024. The vacancy rate started at 8.3% in Q1 2000, hit 17.6% in 2011, and reached a record high of 20.1% in Q2 2024.

Office vacancy rates reached a record 20.1% in the second quarter — the highest since at least 1979, when Moody's began tracking.

• Cargo ship feared sunk off Cape West coast as storms lash province A total of 18 crew members rescued but fate of vessel unclear as SA Maritime Safety Authority raises concern about pollution - Business Live (ZA)

• Saudi Aramco says combustion engines will be around for ‘very, very long time’ after Horse Powertrain investment - FT

• Artificial intelligence has been a big boon for San Francisco real estate but the vacancy rate for San Francisco office space reached a fresh record of 34.5% in the second quarter, up from 33.9% in Q1. - CNBC

My Investing Muse (15Jul24)

Layoffs & Closure news

• Texas supply chain-related firms hit with 285 layoffs Packaging provider closes Houston plant; food supplier closes Dallas facility - FreightWaves

• Unilever plans to cut a third of all office roles in Europe by the end of 2025 under CEO's strategy to boost growth, with as many as 3,200 positions to be eliminated. - Economic Times

• ike has laid off about 20% of employees who worked primarily on its sustainability initiatives, The Oregonian/OregonLive and ProPublica found. Roughly another 10% left voluntarily or were transferred to other jobs. - Fast Company

• Vacuum cleaner manufacturer Dyson is planning to cut one-third of its workforce in the UK over the quarter as a part of global restructuring. - Live Mint

• Software developer UiPath will cut 10% of its workforce, or about 420 jobs, as part of a broader company restructuring. UiPath shares fell 7% on Tuesday and have plunged more than 50% year-to-date. - CNBC

• PricewaterhouseCoopers LLP is cutting staff across its China operations, according to people familiar with the matter, after an exodus of corporate clients diminished the accounting firm’s revenue prospects in the country - The Edge Singapore

• CNN quietly disbands Race and Equality team as part of layoffs - New York Poists

• More than 1,000 of the employees being cut “are not meeting expectations". - Times of India

• NATO officially announced it will send F-16 fighter jets to Ukraine for its war against Russia. Russian President Putin previously said F-16 fighter jets are legitimate targets for Moscow, even on third-country airfields. Putin also said if NATO sends F-16 fighter jets to Ukraine, it is an escalation of Russian rhetoric that could potentially lead to a war. Is NATO now at war with Russia? - BRICS News

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The construction industry saw 4,613 layoff announcements in June, the most since the 2008 Financial Crisis. This jump was even higher than the ~4,200 job cut announcements in the 2020 Pandemic. Layoff announcements surged by 20% year-over-year last month, the largest increase since September 2023. Meanwhile, 1.858 million Americans are now receiving jobless benefits, the most since 2021. The US labor market is weaker than it seems. - X user The Kobeissi Letter

Layoff & closure news continued into the week.

Jobs Data

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Jobs report numbers have been revised DOWN in 4 out of 5 months of 2024. The largest revision from 353,000 to 256,000, or by 97,000 took place in January. Subsequently, February saw a -39,000 downward adjustment. April and May were revised down by 67,000 and 54,000, respectively, or a total of 111,000 jobs. In the first 5 months of 2024, non-farm payrolls have been revised down by a combined 240,000 jobs. Is the initial headline number even worth following anymore? - X user, The Kobeissi Letter

From the revision of the job data, the economy seems to be doing weaker than it looks (despite the recent push in the S&P 500).

S&P500 Q2 earnings outlook

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67 $SPX companies have issued negative EPS guidance for Q2 2024, which is above the 5-year average of 58 and above the 10-year average of 62. - FactSet

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The trailing 12-month P/E ratio for $SPX of 26.4 is above the 5-year average (23.4) and above the 10-year average (21.5). - FactSet

I have plotted the S&P 500 line (Pink line) on top of the S&P 500 Equal Weight Index. This shows how a few companies (especially the Magnificent 7) with heavier weight pulled up the S&P500.

This is an aged chart but this reveals that in 2023 (January to November), the Mag7 is driving most of the growth with the rest of 493 moving sideways.

My final thoughts

The biggest news of the week would be the assassination attempt on presidential candidate Donald Trump. Its failure is likely to stir reaction from all parties. It would be interesting to see how the market will react to this news. President Biden and his team have come out strongly to condemn this act mentioning that there is no room for such X in America. Will this spark any response from more aggressive groups?

In the coming week, we will see the beginning of the quarter to earnings of 2024. Different sources have made various predictions. With the latest CPI data, there is momentum in the market expecting a cut in the interest rate. The PPI data that was released on Friday was concerning as this implied some inflationary pressures in the coming weeks.

The earnings of the last quarter would help to bring more understanding about the market and the economy. It would not be surprising that the magnificent 7 will play a big role in how the various indices will perform in the coming quarter. This raised an important consideration. The indices would reflect the performance of the magnificent 7 more than the performance of the rest of the 493 in the S&P 500. Let us consider monitoring the rest of the market so that we can get a more realistic feel for how the economy is doing.

How do we feel about the economy? How is the cost of living affecting typical citizens? This will speak louder than the data that the government is presenting. The average data does not always represent the typical citizen. It is a mix of the best and the worst and the distribution is unlikely to be balanced. Let us consider hedging in the coming weeks as we anticipate more headwinds, especially with the attention involving NATO, Ukraine and Russia. China's foreign affairs agency has spoken out against American practices. They are room for volatility and Black Swan events.

@TigerStars

$BlackRock(BLK)$

$Bank of America(BAC)$

$Goldman Sachs(GS)$