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The Macro Situation

deregulation (noun)

• the removal of regulations and restrictions;

• Prometheus unbound;

• the literal or metaphorical precursor to having your liver eaten out by an eagle for related transgressions.

― New Entry in the Updated Devil’s Dictionary

“[N]ational job growth is solid but perhaps not quite strong enough to keep unemployment at the current low rate. Net hiring so far this year is running somewhat below estimates for what economists call the breakeven pace, or the rate of hiring needed to keep the unemployment rate constant.” (Lisa Cook, Fed Governor)

Cautious optimism seems to be the flavor of the week:

• While jobless claims were down to 213,000 from 217,000 the previous week, Boeing announced a layoff of nearly 2500 employees in the U.S.

• The LEI (Leading Economic Indicators) Index dropped 0.4% in October. It’s the eighth month in a row there has been a decline. While the LEI looks at 10 indicators, those significantly affecting October included higher jobless claims, fewer building permits, and a decline in manufacturing orders.

• Housing figures were also down, as the main category of single-family housing starts fell 6.9%. In the hurricane-afflicted Southern United States, the figure was much lower at 10.2%

• Since mortgage rates track the 10-year treasury yield, which has been at its highest in 5.5 months, the housing market may be under pressure for a while longer. 

• Consumers seem to be uncertain about Trump’s imminent economic policies. November’s data showed a decrease from 73 (earlier in the month) to 71.8 in consumer entiment.

At the time of writing, the Fed Watch tool, which tracks the prices of various futures contracts related to interest rates (particularly the federal funds rate), estimates the chances of a rate cut in December are 52.7% for 25bps and 47.3% for no cut.

The Chicago Fed made an adjustment to the ANFCI. The new reading places conditions at a -.62, which is a decrease compared to the (newly adjusted) -.59 of the prior week. This level indicates that financial conditions are still loose.

Core Assets Update

Gold (2718.20) filled its role as a safe haven as tensions between Russia and the West intensified.

• Watch: GLD, GDX, NEM

Crude Oil (71.18) was down earlier in the week but pushed above the $70 mark due to escalating hostilities in the Ukraine War.

• Watch: USO, VAL, XOM, RIG

The 10-year Treasury yield (4.412%) edged lower during the week due to mixed data about the economy – i.e. lower jobless claims yet lower consumer sentiment and LEI numbers. 

• Watch: TLT, EDV, IEF

― Todd Mei, PhD and Sebastian Purcell, PhD

AI Sentiment Report

The following sentiment scores use AI to track sectors as leading indicators. (Lesson 4 of The Art of The Bubble covers the selection of lead indicators for bubble trades). The scores are most indicative for the next day of trading (a Monday), but they appear to set the general tone for the next week.

― The Research Team:

Dom Viera, Samantha Russell, Nicole Zinuhova, Michelle Milan

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Benchmarks and Data Sources

All data not otherwise specified (or obvious from context) is taken from TradingView.com.

The cryptocurrency benchmark used is an equally weighted mix of BTC and ETH. While the benchmark for stocks used is the Nasdaq 100.

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