Market shifts and consumer spending: Key insights for investors

• The big rotation is beginning…..Tech dollars go into Value and SMID’s.

• Retail Sales stronger? Or is it just ongoing higher prices?

• Earnings continue to surprise.

• Bonds rally, Oil down and Gold up.

• Try the Summer Orzo Salad.

And the party just won’t quit (although today could be a different story) …. (which is exactly why you need to be on top of your game) …. Investors. traders and algo’s just can’t get enough……the Dow Industrials adding 743 pts or 1.8%, the S&P up 36 pts or 0.7%, the Nasdaq -while up was the underperformer….it rose 37 pts or 0.2% while new money continues to rush into the Russell – (small and mid-caps) pushing that index up 77 pts or 3.5% and the Transports – which were up 517 pts or 3.3%. The equally weighted S&P added 120 pts or 1.7%.   

Retail Sales show that the consumer appears to be just fine…. Top line m/m sales came in at 0% - which doesn’t sound like much – but when the expectation was for -0.3% - that is a win….and Ex Autos & Gas?  That came in at +0.8% when the street was expecting +0.2%......... and both the readings from last month were revised UP as well.  My question continues to be – is the consumer spending more money because they feel confident about the future and the economy or is it still because prices continue to rise? 

Last night I went to Publix (grocery store in NPB) and paid $10.29 for 1 dozen eggs…In fact – I paid $100 for I don’t’ know what….I bought 1 qt of milk, 1 pint of half and half, 4 banana’s, 3 peaches, a package of cheddar cheese, 24 oz of vanilla fat free yogurt, I package of Thomas’s English muffins (actually it was 2 packs, because it was buy one and get one free), a 12 oz package of Dunkin Original Blend,  Bisquick pancake mix and an 8 oz bottle of maple syrup….…and the bill was $100…..  Really?  I did not buy any meat, any vegetables or any paper products or detergents… I didn’t even buy flowers….and that was just for me and my wife…. I don’t have a houseful of kids…. I mean, I’m just sayin’ – prices are NOT coming down on the things you need every day…. Capisce? and I didn’t even mention utilities, insurances or gas for your car. 

Earnings continue to surprise to the upside….UNH rose 6.5% - they reported better than expected numbers and remained bullish on their forward guidance and investors loved it….BAC also jumped – rising 5.3% after reporting better numbers and suggesting that their NII (Net Interest Income) will continue to improve in the months ahead.  MS gained 0.9% after posting a 41% rise in y/y profits. 

SMIDS (Small & Mid-Caps) continue to charge higher….The IWM ETF – rising 3.4% - now up 12.5% ytd….recall – that that ETF was down 6.9% at the end of April…..rallied to unchanged by mid- July and now has rocketed higher – gaining 10% since July 10th….. Value also continues to move up – the SPYV up 1.5% for the day and now up 8.8% ytd. 

All while some parts of the TECH sector are in retreat (which should be no surprise)….The Semi’s - SOXX down 4.7% over the past week – but before you start complaining…that ETF is up 36% ytd….NVDA – the tech sector darling has given back 7.2% in 3 days….causing some analysts to call for the death of the sector…(which is so ridiculous) – again – NVDA is up 155% ytd….and if you include last years performance it is up 770% - so are you really going to have a nervous breakdown over 7.2%?  Well, I guess that depends on when you ‘got in’….but in either case – tech is not going away, NVDA (or the others) is not going away…but that does not mean that some asset managers won’t take advantage of the gains while some take advantage of the pullback.

Bloomberg shows that as of March 31st - both Fidelity and State Street sold a combined 135 million shares during the 1st qtr. but still owned 2 billion shares…. all while Vanguard and Blackrock bought 110 million shares…. bringing their total owned to 4 billion shares…. So, you ask - Why would Vanguard and Blackrock be buyers?  Why would Fidelity and State Street be sellers?  For the same reasons you are a buyer or a seller…. they have a view- you have a view…. They need to manage risk and you need to manage risk…. It’s not more complicated than that.  And remember – don’t create a portfolio based on election year rhetoric.

 As long as you are properly diversified and are not ‘overweighted’ in any one sector – and know what you own and why you own it – then don’t stress….NVDA down 7% is not a disaster….I mean we could see NVDA go down another 8% before it hits trendline support at $114.50…and that still is not a reason to panic…unless of course you are the panicky type…The ultimate question is – has the story changed?  Is the reason you bought it still intact?  If not, then you need to revisit it, if so, then don’t overthink it you may even consider buying more….

This morning tech is under pressure…NVDA is quoted down 3% in the pre-mkt….in my view – it is because that is what all the business shows want to discuss…..they discussed it on the way up and they will discuss it on the way down….the thing to remember is that stocks take the stairs up and the elevator down….moves down are always more dramatic…and like the moves up – they are created by FEAR….the Fear of Missing Out – on the way up and the Fear of Losing value on the way down….but remember you only lose if you ‘take the loss’, by selling the stock….Riding the waves is not losing……Time to move on.

Bonds rallied as demand for treasures continues to rise – which is a bit curious to me…..The CBO (Congressional Budget Office) now says that the fiscal 2024 budget deficit will reach $1.9 trillion – up from their previous estimate of $1.5 trillion….which means that Janet will need to bring more supply to the markets…and more supply usually means lower bond prices and higher yields….something we haven’t seen yet….Remember - US treasuries offer basically no risk….as long as you hold them to maturity – if you buy them and lock in 4.5% then that’s what you get at maturity…anything more or less will depend on what happens in the market and if you make a decision to sell….……. … …The TLT, TLH and AGG all rallied yesterday – rising 1.4%, 1% and 0.4% respectively.  The 2 yr. is now yielding 4.45%, while the 10 yr. is yielding 4.17%.

Oil fell yesterday – testing as low as $80.22/barrel – again they were pushing that weakening China story….Analysts noting that the Chinese economy only grew by 4.7% in the second qtr.…..noting that that was the slowest growth rate since the 1st qtr. of 2023….on the other side though – US Crude inventories fell by 4.4 million barrels – suggesting the US demand remains strong….all while geo-political risks in the Red Sea are suddenly heating up again…..….Oil remains in the $80/$85 trading range for now….Both short and intermediate term trendline supports are at $79.44 and $79.15 levels.

Gold continues to churn in the upper $2400’s…. this morning it is up $11 at $2478….as traders continue to bet on a September rate cut and the beginning of the FED pivot. Remember – lower rates will cause the dollar to fall and support gold and other commodity prices…. For now – we are in the $2400/$2500 trading range.

Eco data today includes Mortgage Apps, Building Permits, Housing Starts, Industrial Production and Capacity Utilization.  Earnings include SYF, JNJ, CFG – all beat, later we will get USB, PLD AA, & UAL.

US futures are LOWER!  Imagine that!  Dow futures down 75, S&P’s down 40, The Nasdaq lower by 250 pts…. Yes 250 pts or 1.2%, while the Russell is down 3. 

Recall –the Tech sector is up 33% ytd, Semi’s up 36%, Communications (also very ‘techy’) up 25%......so if there is a bit of rotation out of the outperformers…you should not be surprised…. again, you ask – has the fundamental story changed?  7 out of the 11 S&P sectors are up double digits…. Financials + 15%, Industrials +12%, Consumer Discretionary + 11%, Utilities + 10.5% and Energy +10.25%... the other 5 sectors are up high single digits except Real Estate which is up 1.2% ytd.

As discussed we are entering what could be a volatile summer – think election rhetoric – and then we enter a seasonally weak time of year….Aug – October….so brace yourself for volatility….The VIX index is kissing resistance at 14.12….a  spike up and thru that will see a decline in stocks – but before you go and sell you stocks consider buying some insurance…..playing the contra trades can help blunt any move lower…..Consider – the DOG, PSQ, SH, VIXY…these ETF’s allow you to benefit if the market drops offsetting any losses on your core portfolio.

Unlike you AAPL or AMZN or JPM or NVDA  - these ETF’s are meant to be strategic…they are not long term names…You use them when and if you think the market is headed lower….You can also use ‘leveraged ETF’s’ but you better be sure you understand the risks associated with those…they cut both ways (key word is ‘leveraged’)…. if you are on the wrong side – the cuts are much deeper…. Just sayin’…. talk to your advisor.   

 The S&P closed at 5667 up 36 pts…The tone is negative this morning…. the cable channels turning on the TECH trade…. which only makes it worse…. Earnings will continue to make headlines…. but it will also be about the election rhetoric as the RNC is about to complete their convention in Milwaukee. Tonight, the highlight is JD Vance and tomorrow it will be DJT.    The weekend shooting now nothing but a distant memory for the left…as Jo Jo has ramped up the language once again on his visit to the NAACP yesterday….……as they prepare for their convention in August.  The jury is still out on who will headline the Democratic ticket…. Stay tuned.

Summer orzo salad

This is a great dish to serve at your next BBQ or even better to just have in the fridge.  It is simple to make – no longer than 12 mins max.  For this you need:

1 lb. of Orzo pasta, garlic, olive oil, fresh spinach, Ricotta Salata Cheese and s&p. (now you can substitute spinach with Arugula if you prefer).

Bring a pot of salted water to a boil and add in the Orzo.  Let it cook until aldente – maybe 8 mins max.

While this is cooking – heat some olive oil in a pan and sauté garlic…. just allowing the oil to take on the garlic flavor – do not burn the garlic…. now remove from heat and set aside.  Cut the Ricotta Salata into small bite size cubes – set aside.

When the Orzo is cooked – strain – always keeping a mug of pasta water – just to remoisten a bit.  Now return the Orzo to the pot and add back about ¼ cup of the water – mix to re-moisten – do not let it puddle…. now toss in the fresh spinach leaves (or Arugula), the oil and garlic – mix well to coat.  (You want just enough oil to coat the pasta – you do not want the pasta bathing in the oil) Now add in the Ricotta Salata and mix again.  Put it in a bowl and refrigerate.  Done.  It is a perfect side dish to any summer BBQ meal or is even good to just eat right from the bowl.