Encouragement?
Posted on Sunday, June 11th, 2023
Last week I told you about my son’s quest for summer employment. We all had dinner together, and he was obviously down. As he left the dinner table, I called him back to give him some encouragement and tell him how proud I was of him and his efforts. He left the room with his head still hung low. Diane remarked- well, that was a little harsh. Harsh? That was my encouragement speech. I called him back, and we all had a good laugh at my lack of speech-making skills. This weekend coming up is Father’s Day, and I drove up to North Carolina with my brother to see our dad. He hasn’t had the best six months, but he is feeling better now. We took him to lunch, and he ordered a hot dog with sauerkraut and a vanilla shake. Either one would put me into severe gastric distress. Suffice it to say he didn’t pass on to me his strong stomach. He did pass on to me a love of golf and family, a tremendous work ethic, belief in myself, and a strong sense of right and wrong. Thanks, Dad. Here’s hoping that speech went a little better.
I could give you an encouraging speech about the market, but the market is doing that all on its own. This week was pretty much the same as the previous three, as the market continued to tick higher. Positioning and sentiment have been light in 2023, and now most have a strong sense that they are missing out on the rally. There are few remaining bears. Once they cave, it should give the market the all-clear to head lower. The market loves to make a fool out of the most people possible. The FOMC meeting is this week, but I really don’t expect much in the way of fireworks. My focus is on the OPEX expiration on Friday. The June expiration is one of the larger expirations of the year. The market will lock in on critical levels and probably will not move much this week. The following Monday and Tuesday have real potential to unlock the market’s recent winning ways. Tech stocks are over-bought and some retrenchment in the Microsoft, Apple, and Nvidia contingent would be healthy for the market.
From the gang over at Goldman Sachs –
The dollar, tech stocks and real rates are not supposed to act like this into a recession.
The dollar rallies (fact) on higher real rates (check) OR rising risk aversion (not present) –
tech rallies (fact) on lower real rates (not present) OR higher risk appetite due to US exceptionalism (check).
Goldman believes that the dollar is right and equities aren’t.
The replenishment of the US Treasury’s TGA account begins in earnest next week. That is a headwind for the market. The market is breaking out of its recent range after we closed above 4200 on the S&P. A break of 4200 is forcing investors to chase the market despite the terrible position of the consumer and the looming recession as FOMO takes over. A move above 4200 sucks people back into the market. The market likes to make a fool out of the most people possible. Everyone has pared back on positions in 2023 as the most telegraphed recession in history was on their minds. Positioning and sentiment are in favor of the bulls. We believe that the narrowness of the rally and the monetary headwinds are going to make the back half of 2023 much more difficult to navigate.
Since we expect a relatively sedate week in the market, we plan on taking a break for Father’s Day, as all the kids will be home. If something breaks in the market, we will send out a note. Happy Father’s Day to all who served.
“Short term volatility is greatest at turning points and diminishes as a trend becomes established.”– George Soros
I think we aspire less to foresee the future and more to be a great contingency planner… you can respond very fast to what’s happening because you thought through all the possibilities, – Lloyd Blankfein
A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. – Winston Churchill
To learn more about us and Blackthorn Asset Management LLC visit our website at www.BlackthornAsset.com .
Disclosure: This blog is informational and is not a recommendation to buy or sell anything. If you are thinking about investing consider the risk. Everyone’s financial situation is different. Consult your financial advisor.