Earnings broadening out, plus lots of easing on the horizon, Chinese stocks, and 🧁 weekend sprinkles 🧁
Earnings broadening out, plus lots of easing on the horizon, Chinese stocks, and 🧁 weekend sprinkles 🧁
The Sandbox Daily (9.27.2024)
Welcome, Sandbox friends.
After a fun week of Future Proof content – All Star Charts, Josh Brown, Sam Ro, and J.P. Morgan – we are back to our regularly scheduled programming.
Today’s Daily discusses:
earnings broadening out
a dovish path ahead
Chinese stocks pop on stimulus measures
🧁 weekend sprinkles 🧁
Let’s dig in.
Markets in review
EQUITIES: Russell 2000 +0.67% | Dow +0.33% | S&P 500 -0.13% | Nasdaq 100 -0.53%
FIXED INCOME: Barclays Agg Bond +0.29% | High Yield +0.25% | 2yr UST 3.559% | 10yr UST 3.754%
COMMODITIES: Brent Crude +1.03% to $72.34/barrel. Gold -0.74% to $2,674.9/oz.
BITCOIN: +1.45% to $65,802
US DOLLAR INDEX: -0.11% to 100.410
CBOE EQUITY PUT/CALL RATIO: 0.50
VIX: +10.34% to 16.96
Quote of the day
“I'm not entitled to have an opinion on this subject unless I can state the arguments against my position better than the people do who are supporting it. I think only when I reach that stage am I qualified to speak.”
- Charlie Munger, 2007 USC Law School Commencement Address
Earnings broadening out
The U.S. growth outlook continues to look quite constructive.
The S&P 500 saw 11% YoY earnings growth in the 2nd quarter, of which nearly half came from stocks outside of the Magnificent 7. This is a change from the prior three quarters when their contribution was negative.
Source: Northern Trust
A dovish path ahead
The Federal Reserve delivered a forceful 0.50% cut to kick off its easing cycle, with Fed Chair Powell characterizing the move as a “recalibration” that shifted monetary policy from bringing down inflation to safeguarding the soft landing.
In addition to the heightened focus on downside risks to the labor market – as foreshadowed by Powell’s Jackson Hole speech, the July FOMC minutes, and Governor Waller’s remarks prior to the September meeting blackout period – the Fed’s move also reflected growing confidence in inflation returning to the Fed’s 2% stated target, perhaps more quickly than previously thought.
In his presser, Powell said the Fed is “not in a rush” – in part to signal that the Fed is making decisions meeting-by-meeting, considering the totality of the incoming data and its implications for the outlook.
And yet, the distribution skew of the dots is decidedly moving in a more dovish direction – the chart below shows the extent of cuts through the end of 2025, with the median forecast expecting 200 bps of cuts over the next 15 months (including Septembers cut).
Source: J.P. Morgan Markets
Chinese stocks pop on stimulus measures
China announced a combination of easing measures this week.
On Tuesday, Chinese authorities announced: a 20bps repo rate cut and a 50bps reserve requirement ratio cut (double the usual increments), a 50bps reduction to rates on outstanding mortgages, and lending measures to support the equity market.
Then, two days later, President Xi Jinping’s meeting of the 24-man Politburo triggered a 'policy put', offering up more easing signals with fiscal measures being reported to include additional government bond issuance of $284 billion in special sovereign bonds.
Reuters called these policy measures a “last-ditch stimulus assault to pull economic growth back towards this year’s roughly 5% target.”
Chinese assets reacted positively to the bazooka of announcements, as KWEB, FXI, and other Chinese surrogates all rising roughly 20% or more this week.
Source: Reuters, Ned Davis Research
🧁 Weekend sprinkles 🧁
Here are the ideas, sights, and sounds that caught my attention this week – perfect for quiet time over the weekend.
Blogs
Humble Dollar – No Regrets (Jonathan Clements)
Carson Group – Here’s the Real Dry Powder That Matters (Sonu Varghese, Ph.D.)
Oblivious Investor – Multi-Millionaire the Boring Way (Mike Piper)
Acadian Asset Management – Invest Like the Worst (Owen Lamont, Ph.D.)
The Big Picture – Marty Zweig Trading Rules (Barry Ritholtz)
Discipline Funds – The Fed Goes 50!!!!! (Cullen Roche)
New York Times – I Worked For the Fed. The Interest Rate Cut is Only One Step in a Larger Plan. (Claudia Sahm)
Wall Street Journal - The Fed Made Its Move. Why Didn’t I? (Jason Zweig)
Podcasts
The Compound and Friends with Josh Brown and Michael Batnick – Tom Lee Strikes Back (Spotify, Apple Podcasts, YouTube)
Up and Vanished – The Disappearance of Tara Grinstead (Podcast Website, Spotify, Apple Podcasts)
Music
The Voidz – 7 Horses (Spotify, Apple Music, YouTube)
Movies
The Blue Angels (IMDB, Prime Video, YouTube)
Books
Anthony Pompliano – How To Live an Extraordinary Life (Amazon)
That’s all for today.
Blake
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Welcome to The Sandbox Daily, a daily curation of relevant research at the intersection of markets, economics, and lifestyle. We are committed to delivering high-quality and timely content to help investors make sense of capital markets.
Blake Millard is the Director of Investments at Sandbox Financial Partners, a Registered Investment Advisor. All opinions expressed here are solely his opinion and do not express or reflect the opinion of Sandbox Financial Partners. This Substack channel is for informational purposes only and should not be construed as investment advice. The information and opinions provided within should not be taken as specific advice on the merits of any investment decision by the reader. Investors should conduct their own due diligence regarding the prospects of any security discussed herein based on such investors’ own review of publicly available information. Clients of Sandbox Financial Partners may maintain positions in the markets, indexes, corporations, and/or securities discussed within The Sandbox Daily. Any projections, market outlooks, or estimates stated here are forward looking statements and are inherently unreliable; they are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.
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