Morning Notes — Cylcical/Value
The near-term dynamic in bond yields is creating a pullback in cyclical and value sectors. We see the pullback as an opportunity to add cyclical/value exposure, specifically in Financials, Industrials and Materials.
Morning Notes — Identifiable Risk
JNJ efficacy data in the 80% range would further weigh on fiscal stimulus expectations that already appear challenged. Markets had assumed that Biden’s ~$1.9T stimulus proposal would be pared back to something closer to ~$900B with full passage likely by the end of February.
Morning Notes — Decoupling
Increased fiscal stimulus expectations and vaccine optimism have been presented together in the recent bullish narrative, but these two themes will likely uncouple in the days ahead. Encouraging JNJ Phase 3 data would greatly reduce the need for large-scale fiscal relief.
Morning Notes — Melt Up
Very early Q4 earnings metrics are coming in much stronger than expected. Overnight results from NFLX, UNH, MS, JBHT and PG beat expectations, but get a mixed investor reception.
Morning Notes — Bond Yield Forecast
Bond prices are in a developing bear market and yields are heading higher. Globalization and technological changes have been weighing on inflation for two decades, but the past 12-years of disinflation was caused by specific events.
Morning Notes — Bond Prices in Developing Bear Market
Biden’s ~$1.9T fiscal stimulus plan was already priced into markets and today’s sell-the-news reaction fits our preview from Wednesday. Fiscal spending expectations drifted beyond realistic levels in aftermath of Georgia’s Senate run-offs and need to unwind further.
Morning Notes — Yields Lower on Schedule
Some of the recent back-up in bond yields reflects high expectations for increased fiscal stimulus/spending. The unveiling of Biden’s economic plan tomorrow has been sufficiently previewed by the press and likely priced into markets.
Morning Notes — Here Now
Ten year Treasury yields are presently testing secondary technical resistance at ~1.16%. Treasury prices are now short-term oversold and odds favor a bounce, meaning yields should fade from these levels.
Morning Notes — Bond Yields and Rotation
Higher bond yields shouldn’t become a problem for value sectors in the near-term. Ten-year Treasury yields above ~1.16% would likely be a catalyst for further value outperformance.
Morning Notes — Fiscal Stimulus Plan Next Thursday
The US Jobs Report for December disappoints with nonfarm payrolls down -140,000 vs consensus for +50,000 and November’s +245,000.