Investors are waking up to a whiff of positivity where stocks are concerned, after last week’s first gain in five that was prompted by weak wage growth.
Alongside a bleak Institute for Supply Management services survey, the data is sending the message to some that the Fed now has more evidence to start winding down its tightening cycle.
But not so fast says our call of the day. It comes from Eric Peters, the chief investment officer of One River Asset Management, who was chatting with a fellow CIO who offered up his own line in the sand for when Fed Chairman Powell will put on the brakes.
“Prepandemic a heavy jet cost $7k-9k an hour to charter. Now it costs $18k-$20k,” the unidentified CIO told Peters and noting that his own private indicators that show a still white-hot market. “All these guys worth $100mm got sucked into a portfolio mix with 75% illiquid investments, 25% liquid. Guys like that spend $3mm-$5mm year and make $2mm after tax. They’re slowly bleeding, but even after last year are not yet scared,” he said.
“Powell won’t finish tightening the tourniquet until he terrifies these guys,” he said. “They need to feel like their private portfolios won’t come back. They need to see their liquid portfolios lower still. They need to take losses to raise liquidity. It happens every cycle. We’re clearly not there yet.”
The feel of 2022 certainly was ick, with major indexes suffering their worst losses since 2008, including a 19.4% drop for the S&P 500 SPX,
When it comes to rich getting poorer, Tesla TSLA,
Peters’ fellow CIO goes on to talk about how prices in recent months have “fallen faster than monetary policy can possibly explain.”
“The next two months will tell us whether this is a bizarre blip or something real. But I see problems for stocks either way,” he said. “If inflation stays high, the Fed will hike to 6%. And if inflation falls quickly, margins narrow as wages stay high, and again stocks come under pressure.”
And the economy is transitioning to an even tougher period for investors — the “stagflation quadrant” that brings slowing growth and softer inflation. “It’s a quadrant where you need to look for idiosyncratic alpha, relative value trading,
cross market kinds of opportunities. It’s tough.”
Read: ‘Markets are going to get rocked’ as Fed is likely to push rates higher, economist warns
Stock futures ES00,
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Three U.S-listed biopharmas got buyout offers from European drugmakers on Monday. Shares of CinCor Pharma CINC,
Shares of biopharma gene-therapy group Ocugen OCGN,
Lululemon shares LULU,
China’s long-running crackdown on internet companies is almost over, a top central bank official reportedly said. That helped boost a swath of companies that were rising in premarket, including Alibaba BABA,
Goldman Sachs GS,
Speaking of banks, Q4 earnings season kicks off Friday, with Bank of America BAC,
A cargo vessel briefly ran aground in Egypt’s Suez Canal, blocking traffic and stirring up memories of a 2021, when a similar incident in jammed up the vital waterway for six days.
It’s another big data week, highlighted by the CPI report due Thursday. For Monday, we’ll get the New York Fed’s inflation forecast, comments from Atlanta Fed President Raphael Bostic and consumer credit
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