Eye On The Market

Before getting into the US$ discussion, three quick things. First, despite strong US data in Q1 and Q2, the US still appears headed for a slowdown later this year. As shown below, many longer-horizon leading indicators point in that direction. Excess household savings are also being run down and should be 60%-70% depleted by the end of the year. Stable copper prices are one exception but its usefu...

Frankenstein’s Monster: banking system deposits and the unintended fallout from the Fed’s monetary experiment; commercial real estate, regional banks and the COVID occupancy shock; the wipeout of Credit Suisse contingent capital securities; a market and economic update; and an update on San Francisco, which has experienced the weakest post-COVID recovery of any major city in North America.

Renewables are growing but don’t always behave the way you want them to.  This year’s topics include the impact of rising clean energy investment and new energy bills, how grid decarbonization is outpacing electrification, the long-term oil demand outlook, the flawed concept of levelized cost when applied to wind and solar power, the scramble for critical minerals, the improving economics of energ...

The large language model battles begin: a look at the future of web search, conventional wisdom machines, hallucinating bears in space, some early application successes and how far they still are from humans. View transcript with chart references

The Federal debt and how the Visigoths may try to break the system if no one fixes it View transcript with the chart references

The affair with the market catalysts of the last decade is over now, and a new era of investing begins View transcript with chart references     

Holiday Eye on the Market: the YUCs, the MUCs, FTX, the Gensler Rule and the Summers Rule

In the October Eye on the Market I wrote about how in 6 of 7 post-war recessions, equity markets preceded the decline in profits, employment and GDP by several months at least. I also mentioned that the best indicator to follow was the ISM survey, which tends to coincide with the equity market bottom +/- 2 months. So, in the interest of thinking about when equities could bottom, the first chart be...

Reruns: how equity declines precede the fall in earnings, growth and employment during recessions; new US semiconductor export policies on China and the clash of empires; and other press article extolling the renewable energy virtues of a country with little relevance for anyone else

Arrested Development: the pressure on profit margins, the tightest labor markets in decades and whether “second chance” policies for those with criminal arrest records can expand the labor force

Three topics in this month’s Eye on the Market. First, an update on the Fed, inflation and corporate profits since we believe the June equity market lows may be retested in the fall. Second, a detailed look at what would have to happen for the climate bill’s projected GHG savings to actually occur; the answer matters given the implications for the US natural gas industry. And finally, will all the...

Topics: A revised map of the United States; investing in equities before a recession; Russia’s natural gas squeeze on Europe leads to another rescue program for Italy; the high cost of pariah status for the oil refining industry

Hydrogen use cases may be much narrower than advertised, and the timeline is a very long one

Fossil fuel bans, heat pumps and electrification of winter heating: What will happen to transmission grids at times of peak loads if no backup heating systems are in place? And what about the pace of change if bans on fossil fuels only apply to new buildings?

The slowdown induced by central bank tightening is just starting. Be patient when adding risk to portfolios. Valuations have declined materially but the price paid for high earnings growth is still elevated.

We continue with two topics on electrification, which is the foundation of many deep decarbonization plans: electric vehicle adoption by gasoline super-users and the transmission quagmire

We start with a summary of the energy landscape, including the energy crisis in Europe, the recovery in the oil & gas sector and a warning label on industrial electrification and carbon sequestration

Surveying the Damage: Russia’s recurring war on Ukraine, equity market declines and the opportunity for bottom-fishing investors, the energy price surge/recession outlook in Europe, the impact of rising metals prices on EV battery costs, the COVID situation in Hong Kong and the latest on ivermectin

The bulk of this note is on China, Russia’s invasion of Ukraine and the surge in natural gas, oil, coal, electricity, wheat, copper, palladium and other prices which will probably drag Europe into recession, and impose a heavy growth drag on the rest of the world as well. But before getting into it, the chart below should hang in the offices of policymakers everywhere. Energy transitions are inher...

Listen to Michael Cembalest, Chairman of Market and Investment Strategy, Monica Dicenso, Head of Global Investment Opportunities Group, and Kathryn Pasqualone, Client Advisor, North America Institutional, discuss the current situation in Russia and Ukraine, and the implications for investors.

Topics: Tracking the market risk unwind; Supply chain update; Ukraine; Invasion of the COVID Body Snatchers

On equity markets, the Lombards, SPAC investors, Bone-setters, George Washington, COVID bots and Omicron.

Some things just cannot be talked about. So in this year’s Thanksgiving piece, I wrote about something else.

“Help Wanted”. We expect semiconductor, vehicle and other goods bottlenecks to resolve themselves in the months ahead, and interpret declining business surveys as the result of a temporary supply shock and not a sign of inadequate demand. As a result, growth should rebound in 2022, and positions that benefit from reflation should benefit (energy, value and cyclicals). However, while goods bottlene...

The global supply chain mess will require increased global vaccination and acquired immunity, semiconductor capacity expansion and the end of extraordinary housing/labor supports to resolve. We expect all three to occur over the next few months, leading to a global growth bounce in 2022