The Jon Sanchez Show
9/13 - Weekly market update
"This iHeart radio station is brought to you by vitamin water." Good evening and welcome to the John Sanchez show here on News Talk 780KOH. This is Jason Gaunt. I will be your Friday driver. I may have said even, preacher habit. Happy Friday. Good afternoon. Even though the sun is going down earlier in the day, it was like 7-something, it was kind of dark out last night, it was odd. But we had a pretty darn good week. I do believe 5 green days in a row, which is quite uncommon to be honest with you. Oftentimes that follows a, oh my gosh, everything's ending type week like we had the week prior. And that effect that we've talked about a ton on the show of gamma, which we'll get into a little bit later, where if nothing bad happens and everyone's bearish, the daily decay of options creates buying across this market. Nvidia, the stock we've talked about to the point that I'm tired of talking about it, but Nvidia was a big reason why the market acted as well as it did this week because of options that there was a fair amount of buying in. I believe that thing was up over 15% for the week. Not the pitching that you chase it, but it certainly was quite the mover this week, got the darn near the $100 a share level and I think closed right around 119, 120 in just five trading days. Once for the day, the Dow finished higher by 297 points or 0.72% to 41,393, the S&P was higher by 30 points or 0.54%, 56, 26, and the tech heavy NASDAQ higher by 114 points, 0.65%, 17, 683, gold continues its strength, 260, 6, close, that was a percent higher today, oil higher by 0.4% to 69, 24, gold, silver, those commodities. As I've talked about quite a bit, I'm not calling for the end of days, but the technicals have been very strong for gold as US interest rates go lower as a function of where people think the Federal Reserve is going with interest rates. So goes the dollar and dollar weakness just because of lower US interest rates is typically going to be something that is a tailwind for things like gold, silver commodities in general. So that higher highs, gold keeps having, there were some comments this week that 3000 could be sooner rather than later, I think probably not as quick as some think, but it's been a heck of a ride that commodity has been very, very strong and folks continue in a diversified portfolio to add that for all the geopolitical reasons, but also just diversification reasons, which we always think you should own all sorts of things, not just stocks and bonds in a portfolio. We got some interesting data today, we got the University of Michigan consumer sentiment survey, this is for September, that number came out pretty good, it came out at a 69 level versus a consensus 68.1. The read through on the sentiment side said that year ahead expectations for finances, the economy, et cetera, were both improving despite uncertainties around the election, which was noted, clearly folks are concerned about outcomes of the election, this is not uncommon, they're concerned every time and as we've talked about, even if your candidate does or doesn't lose the election, it is not a reason to go puke your holdings, all the data that we have implies that that is a terrible time to make that decision just from a seasonality standpoint. Again, talking about seasonality, we're now getting into the two weakest weeks of the trading year, which is mid-September to end of September. I think some of the bears got caught in the bear trap. Coming into this week, there was a fair amount of selling last week with that notion of September being a week month. I always talk about seasonality, it's one of the things that I very much follow, but it's the second half of September that's typically the weakest and so I think bears, the negative view on the market that interest rates and you want to sell into the first rate cut and people worried about valuation in the market and some of the fluff came out of the AI story into this week, which I'll touch on in a bit as to why it refluffed, but oftentimes when sentiment gets too far in one direction, it sets itself up for something like we saw this week. We had S&P that was higher by 4% this week, the Nasdaq was up 6% for the week, the Dow closed higher by 2.6% for the week and the Russell small caps were higher by 4.4%. Those are moves that typically go hand-in-hand with positioning. When you see that type of a climb, that type of a move, it's because of folks being underweight the market, taking a negative bet on the market, the hedge funds that we talk about that are more fast money when they're wrong way, it hurts and when markets move against you, you're forced to unfortunately chase and that's what causes a lot of those more dramatic moves, especially given the Nasdaq up 6% that tends to have a pretty heavy technology waiting into it. Technology coming into this week was darn near 10-year lows for some of the more faster hedge fund type strategies. These are things that we watch that they were very underweight given the, they were overweight earlier this year, chasing the Nvidia's, the Broadcoms, the Microsofts, those types of areas, but they've even caught up from evaluation standpoint and I think that's some of the reason why this market was set up for a week like we had this week. We're back near the highs, fairly close to the highs, but the under the surface, the things that I look at, relative strength, sort of momentum characteristics, aren't as strong as we were back at the prior highs, you know, a couple months ago and those are where I start to get concerned. I start looking for things like divergences where even though your market or stock or whatever is at a similar price level, the underlying strength in terms of volume or things along those lines, doesn't look quite as pretty. That's what you want to look for and that's called divergence. Not to say that I think the market's going to crash, but it sets up well for that back half of the month, September seasonality. Equal weight S&P 500 was higher by a percent today, right? That's an area of the market that you've seen other spots non-tech catch up. Utilities have been strong, consumer staples have been strong, financials have actually been fairly strong. All areas of the market that are oftentimes viewed a little more defensive and that's something to be taking account of as well. Later in the show, I'm going to go into some of the pros and cons of the setup into the back, let's say last third of, you know, what are the last quarter of the year? Yeah, end of September. So the last couple months of the year, what does the setup look like? What are some of the positives and some of the negatives? That'll be again a little bit later in the show, but all in, it was a wonderful week, right? You had a lot of strength in the areas that we needed. We needed technology to bounce back in order to get this market moving in the right direction. Year to date, the S&P 500 is up 19, I'm sorry, 18 percent. The NASDAQ is higher by almost 18 percent as well. The Dow is higher by 10 percent, 9.8 to be exact. And the Russell 2000 small caps, they're up 7.7 percent. So we could shut the door today on this year and say it was a wonderful year. And that is because the Fed has been getting what they want. They're getting inflation lower. And remember, we talked earlier this week, prices aren't going down. They're just going up less at this point. You've got CPI that came in midway through. And right around that 2.5 percent level, core a little bit higher than you would like, but still very much coming into where the Fed's targeted. You've got the interest rates that we're going to get a Fed decision next Wednesday, this coming up Wednesday, where the probability of a 25 basis point cut is now about 50-50 or 50 percent chance of a 25 basis point cut or 50 basis point. It's a coin toss as to what the Fed's going to do. Some of the jaw boning leads you to think that maybe we get more than the 25 basis points. Nick Timeros, who's the Fed whisperer at the Wall Street Journal, started talking about that earlier this week, which some think that is intentional to get the markets thinking about what does a 50 basis point cut look like. You had a pretty darn good investor today, John Paulson, which I'll get into later. But he talked about thinking that the Fed's behind the curve, not in a horrible way. But just that 50 basis points right now probably makes a little more sense, given that we're going to have the month of October off. So cut 50 in September, sort of like we talked about a little bit earlier this week, and then you're at a better spot come November. It's just a matter of is the market going to freak out going, "Oh my gosh, the Fed sees something that the market doesn't if they cut more than sort of is priced in." But right now, we check in right now with Kristen Snow in the Right Now traffic center. Welcome back to the John Sanchez show here on News Talk 780KOH. This is Jason Gaunt. Happy Friday. Today, the Dow closed higher by 297 points, 0.72% to 41.393. The S&P was higher by 30 points, 0.54% to 56.26 and the NASDAQ. That was up 114 points, 0.65%, 17.683. Gold closed above the 2,600 level, 2,606 to be exact. That is 0.99% higher, and oil at 69.24. That is higher by 0.4%. Interest rate-wise, 10-year yield was pretty wild this year, but when all was said and done, they were just six basis points lower on the week to 365. Remember, back in March, we were at 5% and people were worried that 10-year bonds were going to go higher. Given that inflations come down sort of consistently over many of the last months, the Fed is at a 50/50 coin toss right now as to whether they're going to be cutting 25 basis points this Wednesday or 50 basis points. The two-year note was down 7 basis points in total to 358. Data-wise today, we got August export prices that were down 7/10 of a percent. August import prices were 3/10 lower and the University of Michigan consumer confidence number came out. This is a preliminary number, not the final yet. 69, which was better than the 68.1 consensus expectation, really throughout the report, it talked about consumers feeling the economy is looking to improve, though there is substantial uncertainty quoted around the election. Mentioned to, for the year, the S&P is higher by 18%. NASDAQ is up 17.8%. The Dow Jones industrial average, all 30 stocks higher by 9.8% in the Russell 2000 small caps up 7.7% this year. Some of the news items today move in markets. I would say number one is Boeing. Their Machinist Union voted 96% in favor of authorizing a strike. Saw some comments today that they were thinking they wouldn't be surprised to see a month or two. Remember, there is a new CEO at the helm as the old CEO was punted to the curb. Boeing did also say that national transportation safety board told them they have safety and culture issues. President Biden stated today could give Ukraine approval to launch weapons deep into Russian territory according to the New York Times. Former President Trump promised to eliminate taxes on overtime pay. This will need congressional approval, however. Also some comments that President Trump will be discussing cryptocurrency projects on Monday. Altria, MO, things been on a tear, certainly high yield. FDA takes action against an unauthorized e-cigarette promotion at some of their industry trade shows. Apple, AAPL, may have heard of that stock. Initial indications are that the iPhone 16 series delivery times after pre-orders are much shorter than the iPhone 15 and Vision Pro, which by and large just implies that you'll be able to get a really good read really fast as far as what demand looks like. They said even up to 24 hours before once the pre-orders begin. That's pretty positive for folks who think that the iPhone 16 could be a game changer. Some of the newer technology as far as AI, etc. I'd say it's still in the infant stages. It's not a must have as far as this phone's concerned. The thought is at some point they're going to require more and more phone specific chipsets that can do in-phone AI, in-phone data crunching versus needing to go out to the cloud to get answers to come back to the phone. This one seems a little early, but it's going to very much open up the toolkit for developers to create a large language model exposed or AI exposed usage for the phone, which eventually your phone will just sit next to you and tell you everything before you even ask. Look at a couple other items, GE Aerospace. Turkey wants U.S. approval to purchase some GE Aerospace engines. That stock's been very strong and GE healthcare is expected to exchange 10 million GEHC shares to reduce some of their indebtedness to Morgan Stanley. Morgan Stanley was the banker, so they may take in some shares at which will eventually cause Morgan Stanley to need to sell said shares in order to reduce the debt exposure. Interactive brokers, IBKR, looks like they're going to be launching election bets as soon as next week according to the Wall Street Journal, so you can go on your favorite interactive brokers tool and bet on securities essentially that for or against certain presidential candidates that we're now getting to vote on here pretty soon, and they'll use that as some data as to where more accurate betting markets, which will be completely wrong no matter what. NVIDIA, Saudi Arabia is likely to have access to NVIDIA chips within a year, says CNBC, and then finally, U.S. Steel Letter X that's been going back takeover candidate with Nippon Steel, Cleveland Cliffs was thrown around, but there were some comments today saying that the White House will likely delay their decision on that takeover for some time according to the Washington Post, and then one last data point of color, DJT, the Donald Trump truth social stock. He made some comments today, I think that things spiked about 20%, maybe was higher by 10 at the end of the day, but that he did not plan to sell shares anytime soon, which was part of the concern or overhang on that stock recently that he was going to be selling a large stake. But once that was announced, the stock did see a bit of a pop into the close. Why don't we check in now with our friend Jack Saban, who has news traffic and weather. How are you, Jack? Welcome back to the John Sanchez show here on News Talk 780KOH, Happy Friday. This is Jason Gaunt. I'm in for John this evening. Today, the Dow closed higher by 297 points, 0.72%, 41, 393, the S&P was up 30 points or 0.5, 4% to 56, 26, and the Nasdaq up 114 points, 0.65% higher, 17, 683, gold closed above that, $2,600 level, 2,606, and oil at 69, 24, higher by just shy of half of 1%. So where are we at year-to-date market-wise? In general, I've gone over this a couple of times, but just color. The S&P 500 trading right around 18% higher on the year. But what do the skies look like ahead of us? What's the table setting for the next three to six months? Clearly, we have the election coming. That's going to cause all sorts of volatility and all sorts of Tom Fullery, regardless of the outcome, I would say, not really looking forward to that part. Interest rates, we've got a Fed decision coming up here next week on Wednesday, where it's a 50/50 chance of a 25 or half of 1% cut. Remember, the Fed currently is at five and a quarter to five and a half percent, and CPI data, consumer price, data that came out this week was closer to two and a half. So the Fed is a full two and a half percent or more restrictive relative to inflation. And we've talked about that a lot, and sometimes people are like, "What the heck are you talking about?" Well, let's think of what does it cost you to borrow money? This is very short term, but let's assume Fed funds is the rate that you're borrowing money at five and a quarter percent. How much do I need to earn on that money in order to make things work? Well, inflation itself is against me to the tune of two and a half percent. It was up at six, seven, eight percent, right? But the Fed normally is right at where inflation is when they're neutrally restrictive. I know that sounds weird, but when it doesn't sound restrictive to me, but their neutral rate or when they're in line with inflation is sort of their target. When they're below inflation in terms of interest rates, like, "I can borrow money and just inflation itself. I can win to it." That's when the Fed is being very stimulative. They want money out in the economy. They want people out spending, and they're essentially financing you to go out and create things, go build buildings, go do this, that to get the economy going. They're as restrictive right now as they've ever been in terms of that differential. So a positive is that they're going to be taking their foot off the neck of the economy. I've been using the analogy more so of they're going to take their hands off of the neck of a marathon runner, right? The economy's been doing well. It's been humming along. It's been, I would say, running quite efficiently. We've got unemployment at 4.2%. We've got GDP that's implied currently for the next quarter at 3%. So despite what the things will say, the economy itself is doing quite well. The thing that's been holding it back is federal funds rate because they were worried about inflation. So that's why my analogy of more so given the marathon runner more air could be a positive for the next 6 to 12 or more months, and the Fed's "soft landing" could be achieved. I think that's still the base case for most economists at this point, despite some of the negatives of debt, right? The US debt level that has now surpassed 1 trillion with a T in terms of just the debt payments here in 2024. It's applied to be about 1.5 by the end of the year as far as what those total costs are. That is just the debt cost that we have given our 30 plus trillion dollars of debt. That's clearly a headwind. What's the other headwinds to the economy, to the market specifically? Valuation on the S&P 500 is not very low, right? The S&P right now is trading right around 21 times 12 month or forward earnings. Again, what does that mean? The prices right now in terms of earnings are higher than normal. A normal going back, we'll say the last 20 years, is around 17 and a half times, right? So we're 21 versus 17 and a half. Let's put that in context. In 2021, the highest level I have in terms of the market's really expensive, we're at 28 times. So clearly there's more room to the upside, and I would argue more catalysts. You've got AI and video, some of these names that are growing and growing and growing, they could help drive earnings higher over the next couple of years. So that could be a positive, but still, the markets aren't cheap at 21 times. Again, what's the lowest level I see? The market was at nine times earnings back sort of at the depths of 2008, right? So this thing's really, really cheap and 28 times is this thing's really, really expensive. Over the last 20 years, we're at 21. So not egregious, but certainly on the expensive side of average, what's a positive? The equal weighted S&P 500. So again, I know I'm spooning a little madness here, but the S&P 500 is the granddaddy of all momentum indexes, as in the big get bigger, because the way that the index itself is constructed, it is a market cap weighted index. Market cap is just how many shares does the company have outstanding times their stock price? That is their market cap, right? Oftentimes, and I'm just a little teaching, when someone says, "Oh, the stock's expensive. It's at $250 versus a stock that's at $100." I'm like, it doesn't. The price is completely irrelevant, other than some psychological stuff, and we'll get into that in another show. But your stock price means jack and squat. What the value of the company is, is stock price times, well, how many shares do they have outstanding, and then what are their earnings? That then will help us with earnings per share, where I was saying the market is on the upper end of expensive in terms of earnings per share, if you take all 500 companies. The S&P 500 is market cap weighted. As you get bigger, you become a bigger part of the index. Apple, Nvidia, Microsoft, Google, they're 30% to 40% of the whole darn index. As they get bigger, they become a bigger part of the index. Their weight is what's skewing part of that this thing is expensive. Well, if you take the equal weighted S&P, so all 500 stocks, and don't weight them based on their market cap, just literally divide them equally by those 500 stocks. They all have the same amount of weight inside of the index. That is trading at right around 16.5 times. Forward, it's right in line with its average. That's part of why we're seeing utilities pick up their head, financials pick up their head, staples pick up their head. All these other areas that may have lagged behind catch up. That's why they did fairly well this week, and that's why they've done fairly well over the last couple months. It's that term of broadening out. It's not just the leaders of Nvidia and Google and those that need to keep up. You saw some weakness over the last couple weeks in some of those names, even though they had a great week this week, but the market didn't crash. Other parts started to do well. Other more defensive or other areas were picking up the slack, and that's key. If I look at the equal weighted market, it's not expensive. That's part of why I have incremental confidence into next year because everything's not super expensive. Again, same thing. If I look at the equal weighted S&P at that same level back in 21, remember I said the S&P 500 was at 28 times at its richest. The equal weighted S&P was at 25 times at its richest, and it's only at 16 and change now, which is right at average. There's lots of room for other areas of the market to pick up some of the slack. I'm going to call that part of the positive camp. What's a negative? The buffet indicator. I like this. I don't follow it regularly, but another valuation thing. What they do is he takes our favorite buffet from Berkshire Hathaway. There's a lot of news out that they've been raising cash. They have the highest cash levels they've had in a long time as a percentage of the portfolio. They've been selling Bank of America. They've been selling Apple. Those types of names pretty aggressively over the last couple quarters, and they've built up very high levels. He uses an indicator where he looks at the Wilshire 5,000, which is the 5,000 biggest companies, versus the nominal GDP of the United States. You can go find those data points anywhere, or you can just look on Google and it's there. That thing is at its highs. What is the aggregate production of the United States versus 5,000 of the biggest stocks? That ratio is at the same level as it was in 2021. We're really right there. We're back to the highs. If you're looking at a range, you would want to buy that the market when that's really low, as in markets cheap versus GDP. In this case, the market's very rich versus GDP. That's an indicator that if you're looking at from a are we overbought, could trigger on your red side. Equal weight market, I call it a green. Interest rates coming down. I would call that a green. The market cap weighted S&P, kind of rich, maybe a little bit of a yellow or red. The fact that this buffet indicator is more on the red side. This gives you a little bit of a mixed, but again, I would say sort of cautiously optimistic, given the fact that the economy's humming, unemployment's where it's at. Hopefully, once we get to the other side of this election, Tom Fullery will be in a good spot into 2025. But why don't we wrap it up with Kristen Snow in the right now traffic center. Welcome back to the John Sanchez show here on News Talk 780KOH. This is Jason Gaunt. Happy Friday. Good week for the markets. S&P was higher by 4%. The Nasdaq was higher by 6%. The Dow was higher by 2.6% this week. What are we going to see next week? Wednesday is going to be the day. That's when we're expecting the Fed rate decision. Whereas I mentioned earlier, we're looking at about a 50% probability of either 25 basis points or 50 basis points. There isn't a ton coming up before that. You do get retail sales on Tuesday. Not that that's going to move the Fed egregiously in one way or the other, but it is a good data point. I think a ugly retail sales number, which implies that the consumer is slowing faster than expected, could lean the car or lean the car. Lean the car. It's mixing metaphors. Lean things toward a 50 basis point cut, but it seems like Powell wants to keep things slow and steady. They'd rather do 25 basis points for the next N number of meetings, just to not cause concern. There's enough reason to still be moderately feared of inflation given the debt concerns or a weakening dollar near term for the Fed to go 25 bips. I would guess 25 if you pin me in a corner. The only reason I would say 50 is just because, remember, there's not an October meeting before the election. Get a little bit out there, given that they're not going to have a chance to do anything for two months. So much we get retail sales on Tuesday. We'll get industrial production on Tuesday. There's also a $13 billion 20 year treasury bond auction on Tuesday, just empire state manufacturing on Monday, not a big needle mover. On Wednesday, we will get earnings from GIS General Mills. We're going to get weekly MBA mortgage released. You'll get August housing starts looking for 1.23 million on the housing start side. As interest rates come down, you saw some of the areas today, Zillow group, Redfin, those types of names do quite well as that probability of 50 basis points increases. So those are names, they're trading names, I would say, by and large. Certainly have seen an increase of listings on many sites as home sellers who may have been waiting to take advantage of lower rates or starting to put things out there. We're going to, as I mentioned, get that September Fed decision will also on Wednesday or Thursday, rather, get cracker barrel and DRI. You've got weekly jobless claims on Thursday. You will get continuing claims on Thursday. $1.85 million on continuing claims. That number is what you're watching, is the economy deteriorating. If continuing claims picks up, that is part of the nerves. If continuing claims goes lower, then folks are finding jobs. Get September, Philly Fed on Thursday, August home sales, and leading indicators. Still, that number has been negative for, I think, 13 reports in a row. We'll also get natural gas inventories. And on Friday, federal express and linar, another read into the consumer, both on the housing side, FedEx on the shipping side. They've been going through ebb and flow as far as their business is concerned. So I'm interested to see FedEx and what they give the markets, but Wednesday is going to be your day as the Fed is expected to announce. So hope everybody has a wonderful weekend. And thank all the firefighters out there that we get a much, much less smokey one. Thanks again for listening from the John Sanchez Show. I'm Jason Gaunt. He was talk 780, KOH. This program was sponsored by Sanchez Wealth Management. The material in this program was intended as general information only and should not be taken as specific investment tax or legal advice. None of the information on this broadcast was intended to be a solicitation for the purchase or sale of any security. Further information is available by contacting john@sansheswealthmanagement.com or 775-800-1801. John Sanchez offers securities and advisory services through independent financial group LLC, a registered broker, dealer and investment advisor. Remember FINRA SIPC securities offered only in states John Sanchez is registered in. Sanchez Wealth Management LLC and independent financial group LLC are unaffiliated entities. This iHeart radio station is brought to you by vitamin water.