No Anticipation For Interest Rate Hikes In 2023
In his podcast addressing the markets today, Louis Navellier offered the following commentary.
If you wish to listen to this commentary, please click here.
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No Rate Hikes in 2023
We normally rally going into labor day weekend, and I do expect the market to be rallying later this week, but the market is gapping down this morning. What's weighing on the market is the fear that Treasury bond yields will rise as the Fed reduces its balance sheet.
I've been making this argument that because we have a strong dollar and because we have higher rates than other countries such as China, Japan, Britain, and the EU, foreign capital continues to pour in chasing our yields and putting some downward pressure on Treasury yields. Now, whether this international buying pressure will have yields find equilibrium depends on the bid-to-cover ratio at the Treasury auctions. There have been some great Treasury auctions, and then there have been some that are so-so depending on where on the yield curve we're talking about.
But the bottom line is the Fed never fights market rates. I don't anticipate any rate hikes next year in 2023. The Fed wants to wrap it up and get it done. Chairman Powell essentially said that in his speech. He concluded by saying that their aim is to avoid that outcome by acting with resolve now. He wants to hike rates, keep them high, monitor the economy, and not change the Fed policy too much.
The Fed is just going to get in line with market rates. We have a September 21st rate hike at 75 basis points. There might be some fine-tuning in December and then they're done. Unfortunately, Wall Street didn't interpret it that way due to Fed's doublespeak. Chairman Powell last Friday started being hawkish and ended dovish in my opinion. I think the market grossly overreacted.
Nervous Analysts
My favorite economist, Ed Yardeni, said in a report that revenues are at a record high for the stock market. S&P earnings are at a record high, but there are analyst cuts outside of energy. Analysts are very nervous since the strong dollar can hold back some of the multinationals because half the S&P's revenues are outside of America.
Long Commodities
But commodity stocks remain the best bet. That's energy, food, fertilizer, and anything involved in the transportation of commodities, as well as semiconductor companies that are profiting from the onshoring of semis and manufacturing from Taiwan and China.
But, right now, it's every stock for itself. I expect the market to get up on the wrong set of the bed this morning and then it should start to reverse. Hopefully, it will happen today. We are headed into a holiday weekend when we normally rally. Post labor day, energy demand usually drops. But Europe is so screwed up right now with the demand for natural gas and crude oil. We're still eager to supply them so I think energy prices are going to remain elevated.
Furthermore, I believe the energy crisis in Russia is going to persist for some time and that energy stocks are going to have the best earnings for the next two quarters.
Coffee Beans
Only 22% of adults surveyed for the Statista Global Consumer Survey in the United States said that an electric vehicle would be an option for them when buying a new car. This puts the country behind many other nations, with South Korea at 40%, India at 36%, Switzerland at 34%, and the UK at 33%. Source: Statista. See the full story here.
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