Small Caps and Semis — Their 2- and 7-Year Business Cycles
In our book How to Grow Your Wealth in 2023, we featured our projections for the Economic Modern Family.To begin with the Granddad of the Family — Russell…
To begin with the Granddad of the Family -- Russell 2000 (IWM) -- in December 2022, we wrote this:
"The Russell 2000 IWM is the granddad of the Family. Hence, we take his performance seriously. At the start of 2022, IWM was already breaking down, well ahead of the S&P 500 (SPY). The monthly chart is the best one to use for a longer-term outlook for 2023.
"The green line or 80-month moving average represents about a typical business cycle.The 80-month moving average is the megatrend identifier. Should any of the key components fail the 80-month MA in 2023, the calls for 'recession' or more pain from stagflation will only get more painful for the market. As such, IWM only broke it once since September 2011 and that is during the pandemic. So, if we discount that time as unusual, we can say that it has been 12 years in a bullish megatrend. In October 2022, IWM touched it exactly.
"Now, coming into the new year, that October low is key. If IWM holds and gets back through the 23-month MA or blue line, then a bullish trend will continue. Should the 80-month breakdown, I would prepare for a tough time, with pandemic levels in focus."
And here we are at the Ides of March.
IWM could not clear the 23-month moving average. And, with the recent news, IWM has fallen in price, but still considerably above the 80-month moving average. Neither indicative of growth nor recession, we'd call that a trading range.
We also call it stagflation.
With PPI and CPI coming in softer, on the heels of banks in crisis, the market turned its attention to the notion that the Fed will reduce rates this year. In fact, some predict the Fed will lower rates by 2% come December 2023. Sorry, but this resonates with the chaos theory and gold near $3000 per ounce.
Anyhoo, IWM held (although still weakest of the indices) and NASDAQ plus tech stocks took off. Which brings us to Sister Semiconductors.
From the Outlook:
"SMH has not traded below the 80-month MA since October 2010. In fact, the U.S. tech sector and the survival of chip technology has been the bright spot for 13 years! Even the pandemic did not bring this sector below the 23-month MA, as we are heavily reliant on tech for everything.
"Will that continue if the rest of the family fails? And, if SMH remains strong, can it ease the pain of recession?"
With March half over, we will see what our Sister Semiconductors are made of. Over the 23-month, and making money will be easier. However, without Gramps in tow, it will be a short-lived rally.
Lastly, our Complete Trader Bullish Reversal Scan had 2 tech stock picks. Intel (INTC) and Intuit (INTU) -- two Tech stocks that should benefit if this chip rally sustains.
For more detailed trading information about our blended models, tools and trader education courses, contact Rob Quinn, our Chief Strategy Consultant, to learn more.
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In her latest video for CMC Markets, MarketGauge's Mish Schneider shares insights on the gold, the S&P 500 and natural gas and what traders can expect as the markets remain mixed.
Coming Up:
March 16th: The Final Bar with Dave Keller, StockCharts TV, and Twitter Spaces with Wolf Financial
March 17th: CheddarTV Closing Bell
March 20th: Madam Trader Podcast with Ashley Kyle Miller
March 22nd: The RoShowPod with Rosanna Prestia
And down the road
March 24th: Opening Bell with BNN Bloomberg
March 30th: Your Daily Five, StockCharts TV
March 31st: Festival of Learning Real Vision "Portfolio Doctor"
BUFFALO, NY- March 11, 2024 – Impact Journals publishes scholarly journals in the biomedical sciences with a focus on all areas of cancer and aging research. Aging is one of the most prominent journals published by Impact Journals.
Credit: Impact Journals
BUFFALO, NY- March 11, 2024 – Impact Journals publishes scholarly journals in the biomedical sciences with a focus on all areas of cancer and aging research. Aging is one of the most prominent journals published by Impact Journals.
Impact Journals will be participating as an exhibitor at the American Association for Cancer Research (AACR) Annual Meeting 2024 from April 5-10 at the San Diego Convention Center in San Diego, California. This year, the AACR meeting theme is “Inspiring Science • Fueling Progress • Revolutionizing Care.”
Visit booth #4159 at the AACR Annual Meeting 2024 to connect with members of the Agingteam.
About Aging-US:
Agingpublishes research papers in all fields of aging research including but not limited, aging from yeast to mammals, cellular senescence, age-related diseases such as cancer and Alzheimer’s diseases and their prevention and treatment, anti-aging strategies and drug development and especially the role of signal transduction pathways such as mTOR in aging and potential approaches to modulate these signaling pathways to extend lifespan. The journal aims to promote treatment of age-related diseases by slowing down aging, validation of anti-aging drugs by treating age-related diseases, prevention of cancer by inhibiting aging. Cancer and COVID-19 are age-related diseases.
Agingis indexed and archived byPubMed/Medline (abbreviated as “Aging (Albany NY)”), PubMed Central, Web of Science: Science Citation Index Expanded (abbreviated as “Aging‐US” and listed in the Cell Biology and Geriatrics & Gerontology categories), Scopus (abbreviated as “Aging” and listed in the Cell Biology and Aging categories), Biological Abstracts, BIOSIS Previews, EMBASE, META (Chan Zuckerberg Initiative) (2018-2022), and Dimensions (Digital Science).
Please visit our website at www.Aging-US.com and connect with us:
NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism
One month after the inflation outlook tracked by the NY Fed Consumer Survey extended their late 2023 slide, with 3Y inflation expectations in January sliding to a record low 2.4% (from 2.6% in December), even as 1 and 5Y inflation forecasts remained flat, moments ago the NY Fed reported that in February there was a sharp rebound in longer-term inflation expectations, rising to 2.7% from 2.4% at the three-year ahead horizon, and jumping to 2.9% from 2.5% at the five-year ahead horizon, while the 1Y inflation outlook was flat for the 3rd month in a row, stuck at 3.0%.
The increases in both the three-year ahead and five-year ahead measures were most pronounced for respondents with at most high school degrees (in other words, the "really smart folks" are expecting deflation soon). The survey’s measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) decreased at all horizons, while the median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—declined at the one- and three-year ahead horizons and remained unchanged at the five-year ahead horizon.
Going down the survey, we find that the median year-ahead expected price changes increased by 0.1 percentage point to 4.3% for gas; decreased by 1.8 percentage points to 6.8% for the cost of medical care (its lowest reading since September 2020); decreased by 0.1 percentage point to 5.8% for the cost of a college education; and surprisingly decreased by 0.3 percentage point for rent to 6.1% (its lowest reading since December 2020), and remained flat for food at 4.9%.
We find the rent expectations surprising because it is happening just asking rents are rising across the country.
At the same time as consumers erroneously saw sharply lower rents, median home price growth expectations remained unchanged for the fifth consecutive month at 3.0%.
Turning to the labor market, the survey found that the average perceived likelihood of voluntary and involuntary job separations increased, while the perceived likelihood of finding a job (in the event of a job loss) declined. "The mean probability of leaving one’s job voluntarily in the next 12 months also increased, by 1.8 percentage points to 19.5%."
Mean unemployment expectations - or the mean probability that the U.S. unemployment rate will be higher one year from now - decreased by 1.1 percentage points to 36.1%, the lowest reading since February 2022. Additionally, the median one-year-ahead expected earnings growth was unchanged at 2.8%, remaining slightly below its 12-month trailing average of 2.9%.
Turning to household finance, we find the following:
The median expected growth in household income remained unchanged at 3.1%. The series has been moving within a narrow range of 2.9% to 3.3% since January 2023, and remains above the February 2020 pre-pandemic level of 2.7%.
Median household spending growth expectations increased by 0.2 percentage point to 5.2%. The increase was driven by respondents with a high school degree or less.
Median year-ahead expected growth in government debt increased to 9.3% from 8.9%.
The mean perceived probability that the average interest rate on saving accounts will be higher in 12 months increased by 0.6 percentage point to 26.1%, remaining below its 12-month trailing average of 30%.
Perceptions about households’ current financial situations deteriorated somewhat with fewer respondents reporting being better off than a year ago. Year-ahead expectations also deteriorated marginally with a smaller share of respondents expecting to be better off and a slightly larger share of respondents expecting to be worse off a year from now.
The mean perceived probability that U.S. stock prices will be higher 12 months from now increased by 1.4 percentage point to 38.9%.
At the same time, perceptions and expectations about credit access turned less optimistic: "Perceptions of credit access compared to a year ago deteriorated with a larger share of respondents reporting tighter conditions and a smaller share reporting looser conditions compared to a year ago."
Also, a smaller percentage of consumers, 11.45% vs 12.14% in prior month, expect to not be able to make minimum debt payment over the next three months
Last, and perhaps most humorous, is the now traditional cognitive dissonance one observes with these polls, because at a time when long-term inflation expectations jumped, which clearly suggests that financial conditions will need to be tightened, the number of respondents expecting higher stock prices one year from today jumped to the highest since November 2021... which incidentally is just when the market topped out during the last cycle before suffering a painful bear market.
Homes listed for sale in early June sell for $7,700 more
New Zillow research suggests the spring home shopping season may see a second wave this summer if mortgage rates fall
The post Homes listed for sale in…
A Zillow analysis of 2023 home sales finds homes listed in the first two weeks of June sold for 2.3% more.
The best time to list a home for sale is a month later than it was in 2019, likely driven by mortgage rates.
The best time to list can be as early as the second half of February in San Francisco, and as late as the first half of July in New York and Philadelphia.
Spring home sellers looking to maximize their sale price may want to wait it out and list their home for sale in the first half of June. A new Zillow® analysis of 2023 sales found that homes listed in the first two weeks of June sold for 2.3% more, a $7,700 boost on a typical U.S. home.
The best time to list consistently had been early May in the years leading up to the pandemic. The shift to June suggests mortgage rates are strongly influencing demand on top of the usual seasonality that brings buyers to the market in the spring. This home-shopping season is poised to follow a similar pattern as that in 2023, with the potential for a second wave if the Federal Reserve lowers interest rates midyear or later.
The 2.3% sale price premium registered last June followed the first spring in more than 15 years with mortgage rates over 6% on a 30-year fixed-rate loan. The high rates put home buyers on the back foot, and as rates continued upward through May, they were still reassessing and less likely to bid boldly. In June, however, rates pulled back a little from 6.79% to 6.67%, which likely presented an opportunity for determined buyers heading into summer. More buyers understood their market position and could afford to transact, boosting competition and sale prices.
The old logic was that sellers could earn a premium by listing in late spring, when search activity hit its peak. Now, with persistently low inventory, mortgage rate fluctuations make their own seasonality. First-time home buyers who are on the edge of qualifying for a home loan may dip in and out of the market, depending on what’s happening with rates. It is almost certain the Federal Reserve will push back any interest-rate cuts to mid-2024 at the earliest. If mortgage rates follow, that could bring another surge of buyers later this year.
Mortgage rates have been impacting affordability and sale prices since they began rising rapidly two years ago. In 2022, sellers nationwide saw the highest sale premium when they listed their home in late March, right before rates barreled past 5% and continued climbing.
Zillow’s research finds the best time to list can vary widely by metropolitan area. In 2023, it was as early as the second half of February in San Francisco, and as late as the first half of July in New York. Thirty of the top 35 largest metro areas saw for-sale listings command the highest sale prices between May and early July last year.
Zillow also found a wide range in the sale price premiums associated with homes listed during those peak periods. At the hottest time of the year in San Jose, homes sold for 5.5% more, a $88,000 boost on a typical home. Meanwhile, homes in San Antonio sold for 1.9% more during that same time period.
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