TRACKRECORD DAILY
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TRACKRECORD DAILY

No news is good news…

On a day with no real news, the tech sector powered ahead strongly.

On a day with no real news, the tech sector powered ahead strongly. Energy stocks continued to outperform, and some (those in our Model Portfolio) broke to new highs.

There’s really no way to say this without repeating what we’ve been saying for a long time. These are supertrends which you do not want to miss. Just stay with it.

TRADING TIP

Some things might be too cheap to be true

More often than not, market participants tend to use the past price movements of a stock to predict the future trajectory of the stock. While historical data is useful in technical analysis and determining the entry of a position. It should not always be relied on.

Let’s say a stock has gone up to $50 in the past and it is currently trading at $1. Is it a good value proposition? Not necessarily. Perhaps it could be due to an impending default of loans by the company or it could be due to the obsolescence of the goods and services the company provides. These would then explain the unusually low price for the stock and the likelihood of the stock going back to $50 is miniscule or close to zero.

Hence, always ask yourself what could be the reason for the low price if you see yourself being tempted into buying up equities that seem to be promising really good “value”.

DAY AHEAD

Nothing noteworthy is on the agenda today. Markets will be mainly driven by movements in the stock markets.

The listing of the first Bitcoin futures ETF (BITO) by ProShares on the NY Stock Exchange today should be interesting. This will be the first of many products which will give the average investor access to cryptocurrencies.

TRADING PLAN

1. Currencies:

Keep short USD and long NZD, & CNH. USD is starting to lose ground against our preferred currencies. Stay short.

2. Commodities: Uranium & Energy — Stay invested.

Key risks: Higher US bond yields, and Fedspeakers’ thoughts on the tapering process

3. Equities:

Equity Index: Long Nasdaq futures. It’s starting to look like we are going to test new highs. Stay long.

Single Stocks: Despite the broad market being lower in recent weeks, some of the stocks in TrackRecord Model Portfolio are continuing to power ahead! Get involved and stay involved. `

Key risks : Higher US bond yields, and Fedspeakers on the tapering process in the days ahead

WHAT HAPPENED YESTERDAY

Market movement as of New York Close 18 Oct 2021
  • Dollar ended the day relatively unchanged on a quiet day. Industrial Production data (-1.3% month-on-month vs expected +0.2% and previous print was revised from +0.4% to -0.1%) showed that production at U.S. factories fell by the most in seven months in September, erasing earlier gains on expectations that the Federal Reserve may be closer to raising interest rates than previously expected.
  • The US 2-year Treasury Bond yield increased 3 basis points to 0.44%. 10-year yield remained unchanged at 1.59%
  • S&P 500 increased +0.34% on Monday, overcoming an early -0.5% decline for its fourth straight day of gain. The mega-caps did the heavy lifting and drove the outperformance of the Nasdaq (+1.02%). The Russell 2000 (+0.1%) was slightly up, while the Dow Jones Industrial Average (-0.1%) finished in the red as the tech sector and the energy sector powered higher.
  • RBA meeting minutes showed that the central bank remains optimistic about economic growth in Australia. A rate hike is not expected till 2024 as the inflation targets of 2–3% will not be attained till then. RBA Governor Lowe’s panel participation on “Central Bank Independence, Mandates and Policies” on Friday will provide further clues on future central bank policies.
  • Apple (AAPL 146.55, +1.71, +1.2%) seemed to provide an additional boost in the mega-cap trade after unveiling a new MacBook Pro, the third generation of AirPods, and a new subscription tier for Apple Music. AAPL shares rose +1.2% after being up +0.3% right before its product event.

HEADLINES & MARKET IMPACT

Chip shortages, Hurricane Ida weigh on U.S. factory output; demand remains strong

Notable Snippet: Production at U.S. factories declined the most in seven months in September as an ongoing global shortage of semiconductors depressed motor vehicle production, further proof that supply constraints were hampering growth economics.

Manufacturing output last month was also affected by the lingering effects of Hurricane Ida, which also severely disrupted production at the mines. Monday’s Federal Reserve report followed last week’s data that showed a solid rise in inflation in September. Although retail sales increased last month, that reflected higher prices for motor vehicles.

COMMENTS/IMPACT: The West needs to protect its own interest in an increasingly multi-polar world and we believe that we will see more of such infrastructure deals and building between these countries. In addition, the effect of supply chain deals are not just siloed between the two parties but beneficiaries also extend to those who are reliant on the network, increasing the value of localized companies and businesses for those who will take the effort to look deeper into domestic issues.

Power squeeze curbs Chinese growth, leaves Europe in a gas bind

Notable Snippet: China’s power shortages hit growth in the world’s second biggest economy, threatening more pain for global supply chains, while Europe’s gas squeeze looked set to continue as Russia’s Gazprom showed no sign of hiking exports to the region in October.

Coal, oil and gas prices have all rocketed higher in recent weeks hammering utilities and consumers from Beijing to Brussels, raising inflationary pressures and putting at risk a global recovery from the COVID-19 pandemic.

THEMATIC CONTEXT: “This is the real elephant in the room for China, a power supply crunch will have a material impact on GDP and growth on China as opposed to the Evergrande situation and we should be alert to the developing situation. We have been heavily positioned in energy and warning about this acute problem since 2020, it seems that things are playing out as projected. Hold onto your hats as traditional energy will be back in vogue.” — 28th Sept 2021

COMMENTS/IMPACT: Energy is currently the bottleneck as economies continue to build their way forward. Due to this existing supply/demand imbalance, an interim bull (years) market in the traditional energy space exists. Beyond that nuclear energy remains the only energy source that can sustain the large energy demands and hence, we believe uranium to be the most mispriced/underpriced asset in the coming supercycle.

Tight U.S. job market triggers strikes for more pay

Notable Snippet: Thousands of workers remain on strike across the United States demanding higher pay and better conditions despite Hollywood make-up artists and camera operators reaching a deal over the weekend to avoid a walkout, and the tight jobs market has only emboldened them.

Kevin Bradshaw is an employee at Kellogg Co’s (K.N) cereal plant in Memphis, Tennessee, where most of North America’s Frosted Flakes are made. He feels anything but great about cuts to healthcare coverage, retirement benefits and vacation time that union officials say the company is pushing for from about 1,400 workers on strike since Oct. 5 at plants in Michigan, Nebraska, Pennsylvania and Tennessee.

THEMATIC CONTEXT: “We suspect that Biden’s vaccine mandate will put a dent in US jobs recovery growth as the country is polarized over vaccine politics and believe that many will either voluntarily quit or be fired from their jobs. The result will be a goldilocks economy that forces the hand of the FED and Government to print and support easier monetary policies. Stay invested.” — 18th Oct 2021

COMMENTS/IMPACT: Vaccine politics is causing job losses and the working class is weaponizing the already acute labour shortage situation to leverage for more pay. We suspect that wage price inflation is on the cusp of a huge uptick and this makes the overall inflation picture less “transitory”. In addition, with a potential goldilocks economy due to high unemployment, we believe that easy monetary policy is here to stay much longer than most expect and asset prices have much farther to go than one can imagine.

SENTIMENT

FX

STOCK INDICES

Phan Vee Leung
CIO & Founder, TrackRecord

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