YTD, 65% of large-cap fund managers trailing but only 47% of small-cap funds missing. Add to YE chase potential. Important data is Nov PCE on Friday 12/22.

We discuss: It’s holiday party season and we spoke to many institutional investors over the weekend.  Anecdotally, 66% remain bearish with bearish views on Fed. Plus we analyze fund manager performance.

Please click below to view our Macro Minute (Duration: 4:56).

Over the various holiday cocktail parties in the past week, anecdotally, I find most institutional investors remain cautious, mainly because the takeaway for many of the Dec FOMC is “Fed sees something that we don’t and that explains their dovish pivot.”

• Foremost, that statement above reflects a bearish perspective, which many investors have anchored to at the start of the year. At the start of 2023, many believed the Fed was in for a decade of inflation fighting ala 1970s-80s and thus, stocks could not sustain any gains until inflation was defeated. And many state that stocks fall on the first rate cut. That is true only if this was a normal monetary cycle, but that is not the case.
• Instead, inflation has fallen “like a rock” this year and long-term interest rates have sniffed out a far faster path of normalization than many expected. So to me, there remains an anchoring bias in those with a bearish take on Dec FOMC.
• Our data science team, led by “tireless Ken,” updated our benchmarking data on fund managers. This database tracks 1,600 funds representing $5.5 trillion of AUM. So it is a very comprehensive look at fund manager performance. Here are the high level results:
  – % beating/avg fund return vs benchmark
  – Large-cap 35%/-6.5%
  – Small-cap 53%/+0.6%
  – Small-cap growth 38%/-0.9%
• YTD, the percent beating is very low for large-cap and small-cap growth managers (typically 45% beat) and shows the exceptional challenges of 2023. We know that concentrated gains of FAANG contributed to the performance challenges for large-cap managers.
• But to me, it seems that the underperformance of small-cap growth managers is due to an overly defensive/bearish view on the macro in 2023. After all, if one felt inflation war would strengthen in 2023, one could see growth managers favoring low volatility which would have hampered performance.
• As we think about the final two weeks of 2023, this tells me that there will be a certain amount of performance chasing into YE. And couple that with the fact that retail investors withdrew $240 billion from ETF and mutual funds, in a year when S&P 500 >25%, and one can see why equities have an underyling bid into YE.
• As for incoming data this week, there are quite a lot of housing-related macro data points but the key is Friday’s Nov PCE deflator:
  – 12/18 Mon 10am ET: NAHB Dec Housing Index
  – 12/19 Tue 8:30am ET: Nov Housing Starts
  – 12/20 Wed 10:00 ET: Nov Existing Home Sales
  – 12/21 Thu: 3Q GDP third revision + Philly Fed
  – 12/22 Fri 8:30am: Nov PCE Deflator         +0.20%
  – 12/22 Fri 10am ET: U Mich Dec final 1-year inflation
  – 12/22 Fri 10am ET: Nov New Home Sales

BOTTOM LINE: We are dip buyers into YE

Our message remains the same. We see markets strong into YE

• We favor FAANG/Technology QQQ -0.25%
• Small-caps IWM -0.71%  KRE -0.45%
• Financials XLF 0.01%
• Bitcoin as well
  

Key incoming data December

• 12/01 9:45am ET S&P Global Manufacturing PMI November FinalTame 
• 12/01 10am ET November ISM ManufacturingStrong 
• 12/05 9:45am ET S&P Global Services & Composite PMI November FinalStrong 
• 12/05 10am ET JOLTS Job Openings OctoberTame 
• 12/05 10am ET November ISM ServicesStrong 
• 12/06 8:30am ET 3QF 2023 Nonfarm ProductivityStrong 
• 12/07 9am ET Manheim Used Vehicle Index November FinalTame 
• 12/08 8:30am ET November Jobs ReportTame 
• 12/08 10am ET U. Mich. Sentiment and Inflation Expectation December PrelimTame 
• 12/12 8:30am ET November CPITame 
• 12/13 8:30am ET November PPITame
• 12/13 2pm ET FOMC Rate DecisionDovish
• 12/14 8:30am ET November Retail Sales DataTame
• 12/15 8:30am ET December Empire Manufacturing SurveyTame
• 12/15 9:45am ET S&P Global PMI December PrelimTame
• 12/18 8:30am ET December New York Fed Business Activity Survey
• 12/18 10am ET December NAHB Housing Market Index
• 12/19 9am ET Manheim Used Vehicle Index December Mid-Month
• 12/20 10am ET December Conference Board Consumer Confidence
• 12/21 8:30am ET 3QT 2023 GDP
• 12/21 8:30am ET December Philly Fed Business Outlook Survey
• 12/22 8:30am ET November PCE
• 12/22 10am ET: U. Mich. Sentiment and Inflation Expectation December Final
• 12/26 9am ET December S&P CoreLogic CS home price
• 12/26 10:30am ET Dallas Fed December Manufacturing Activity Survey

Key incoming data November

• 11/01 9:45am ET S&P Global PMI October FinalTame 
• 11/01 10am ET JOLTS Job Openings SeptemberMixed
• 11/01 10am ET October ISM ManufacturingTame
• 11/01 10am ET Treasury 4Q23 Quarterly Refunding Press ConferenceTame
• 11/01 2pm ET FOMC Rate DecisionDovish
• 11/02 8:30am ET: 3Q23 Nonfarm ProductivityTame
• 11/03 8:30am ET October Jobs Report Tame
• 11/03 10am ET October ISM ServicesMixed
• 11/07 9am ET Manheim Used Vehicle Index October FinalTame
• 11/10 10am ET U. Mich. November prelim Sentiment and Inflation Expectation Hot
• 11/14 8:30am ET October CPI Tame
• 11/15 8:30am ET October PPI Tame
• 11/15 8:30am ET November Empire Manufacturing Survey Resilient
• 11/15 8:30am ET October Retail Sales DataResilient
• 11/16 8:30am ET November New York Fed Business Activity SurveyTame
• 11/16 8:30am ET November Philly Fed Business Outlook Survey Tame
• 11/16 10am ET November NAHB Housing Market Index Tame
• 11/17 9am ET Manheim Used Vehicle Index November Mid-MonthTame
• 11/21 2pm ET Nov FOMC Meeting MinutesTame
• 11/22 10am ET: U. Mich. November final Sentiment and Inflation ExpectationTame
• 11/24 9:45am ET S&P Global PMI November Prelim Mixed
• 11/27 10:30am ET Dallas Fed November Manufacturing Activity SurveyTame
• 11/28 9am ET November S&P CoreLogic CS home price Tame
• 11/28 10am ET November Conference Board Consumer ConfidenceTame
• 11/29 8:30am ET 3QS 2023 GDPStrong
• 11/29 2pm ET Fed Releases Beige BookTame
• 11/30 8:30am ET October PCETame

Key incoming data October

•  10/2 10am ET September ISM ManufacturingTame
•  10/3 10am ET JOLTS Job Openings AugustHot
•  10/4 10am ET September ISM ServicesTame
•  10/6 8:30am ET September Jobs ReportMixed
•  10/6 9am ET Manheim Used Vehicle Index September FinalTame
• 10/10 11am NY Fed Inflation ExpectationsMixed
•  10/11 8:30am ET September PPIMixed
•  10/11 2pm ET Sep FOMC Meeting MinutesTame
•  10/12 8:30am ET September CPIMixed
•  10/13 10am ET U. Mich. September prelim 1-yr inflationMixed
•  10/16 8:30am ET October Empire Manufacturing SurveyTame
•  10/17 8:30am ET October New York Fed Business Activity SurveyTame
• 10/17 8:30am ET September Retail Sales DataHot
•  10/17 9am ET Manheim October Mid-Month Used Vehicle Value IndexTame
•  10/17 10am ET October NAHB Housing Market IndexTame
• 10/18 8:30am ET September Housing StartsTame
• 10/18 2pm ET Fed releases Beige BookTame
•  10/19 8:30am ET October Philly Fed Business Outlook SurveyTame
• 10/19 10am ET Existing Home SalesTame
• 10/19 12pm ET Fed (including Powell) at Economic Club of New York
•  10/24 9:45am ET S&P Global PMI October PrelimTame
•  10/26 8:30am ET 3Q 2023 GDP AdvanceStrong
•  10/27 8:30am ET September PCETame
•  10/27 10am ET Oct F UMich Sentiment and Inflation expectationTame
•  10/30 10:30am ET Dallas Fed September Manufacturing Activity SurveyTame
• 10/31 8:30am ET 3Q23 Employment Cost IndexMixed
•  10/31 9am ET August S&P CoreLogic CS home priceMixed
•  10/31 10am ET October Conference Board Consumer ConfidenceTame

Key incoming data September

•  9/1 8:30am ET August Jobs ReportTame
•  9/1 10am ET August ISM ManufacturingTame
•  9/6 10am ET August ISM ServicesMixed
•  9/6 2pm ET Fed releases Beige BookTame
•  9/8 9am ET Manheim Used Vehicle Index August FinalTame
•  9/8 2Q23 Fed Flow of Funds ReportTame
•   9/13 8:30am ET August CPIMixed
•  9/14 8:30am ET August PPITame
•  9/15 8:30am ET September Empire Manufacturing SurveyTame
•  9/15 10am ET U. Mich. September prelim 1-yr inflationTame
•  9/18 8:30am ET September New York Fed Business Activity SurveyTame
•  9/18 10am ET September NAHB Housing Market IndexTame
•  9/19 9am ET Manheim September Mid-Month Used Vehicle Value IndexMixed
•  9/20 2pm ET September FOMC rates decisionMarket saw Hawkish
•  9/21 8:30am ET September Philly Fed Business Outlook SurveyMixed
•  9/22 9:45am ET S&P Global PMI September Prelim
•  9/25 10:30am ET Dallas Fed September Manufacturing Activity Survey
•  9/26 9am ET July S&P CoreLogic CS home price
•  9/26 10am ET September Conference Board Consumer Confidence

Key incoming data August

• 8/1 10am ET July ISM ManufacturingTame
• 8/1 10am ET JOLTS Job Openings JunTame
• 8/2 8:15am ADP National Employment ReportHot
• 8/3 10am ET July ISM ServicesTame
• 8/4 8:30am ET July Jobs reportTame
• 8/7 11am ET Manheim Used Vehicle Index July FinalTame
• 8/10 8:30am ET July CPITame
• 8/11 8:30am ET July PPITame
• 8/11 10am ET U. Mich. July prelim 1-yr inflation Tame
• 8/11 Atlanta Fed Wage Tracker JulyTame
• 8/15 8:30am ET Aug Empire Manufacturing SurveyMixed 
• 8/15 10am ET Aug NAHB Housing Market IndexTame
• 8/16 8:30am ET Aug New York Fed Business Activity SurveyNeutral
• 8/16 2pm ET FOMC MinutesMixed 
• 8/17 8:30am ET Aug Philly Fed Business Outlook SurveyPositive
• 8/17 Manheim Aug Mid-Month Used Vehicle Value IndexTame
• 8/23 9:45am ET S&P Global PMI Aug PrelimWeak
• 8/25 10am ET Aug Final U Mich 1-yr inflationMixed
• 8/28 10:30am ET Dallas Fed Aug Manufacturing Activity SurveyTame
• 8/29 9am ET June S&P CoreLogic CS home priceTame
• 8/29 10am ET Aug Conference Board Consumer ConfidenceTame
• 8/29 10 am ET Jul JOLTSTame
• 8/31 8:30am ET July PCETame

Key incoming data July

• 7/3 10am ET June ISM ManufacturingTame
• 7/6 8:15am ADP National Employment Report Hot
• 7/6 10am ET June ISM ServicesTame
• 7/6 10 am ET May JOLTSTame
• 7/7 8:30am ET June Jobs reportMixed
• 7/10 11am ET Manheim Used Vehicle Index June FinalTame
• 7/12 8:30am ET June CPITame
• 7/13 8:30am ET June PPITame
• 7/13 Atlanta Fed Wage Tracker JuneTame
• 7/14 10am ET U. Mich. June prelim 1-yr inflationMixed
• 7/17 8:30am July Empire Manufacturing Survey
• 7/18 8:30am July New York Fed Business Activity Survey
• 7/18 10am July NAHB Housing Market Indexin-line
• 7/18 Manheim July Mid-Month Used Vehicle Value IndexTame
• 7/25 9am ET May S&P CoreLogic CS home priceTame
• 7/25 10am ET July Conference Board Consumer ConfidenceTame
• 7/26 2pm ET July FOMC rates decisionTame
• 7/28 8:30am ET June PCE Tame
• 7/28 8:30am ET 2Q ECI Employment Cost Index Tame
• 7/28 10am ET July Final U Mich 1-yr inflation Tame

Key data from June

• 6/1 10am ET May ISM ManufacturingTame
• 6/2 8:30am ET May Jobs reportTame
• 6/5 10am ET May ISM ServicesTame
• 6/7 Manheim Used Vehicle Value Index MayTame
• 6/9 Atlanta Fed Wage Tracker AprilTame
• 6/13 8:30am ET May CPITame
• 6/14 8:30am ET May PPITame
• 6/14 2pm ET April FOMC rates decisionTame
• 6/16 10am ET U. Mich. May prelim 1-yr inflationTame
• 6/27 9am ET April S&P CoreLogic CS home priceTame
• 6/27 10am ET June Conference Board Consumer ConfidenceTame
• 6/30 8:30am ET May PCETame
• 6/30 10am ET June Final U Mich 1-yr inflationTame

Key data from May

• 5/1 10am ET April ISM Manufacturing (PMIs turn up)Positive inflection
• 5/2 10am ET Mar JOLTSSofter than consensus
• 5/3 10am ET April ISM ServicesTame
• 5/3 2pm Fed May FOMC rates decisionDovish
• 5/5 8:30am ET April Jobs reportTame
• 5/5 Manheim Used Vehicle Value Index AprilTame
• 5/8 2pm ET April 2023 Senior Loan Officer Opinion SurveyBetter than feared
• 5/10 8:30am ET April CPITame
• 5/11 8:30am ET April PPITame
• 5/12 10am ET U. Mich. April prelim 1-yr inflation Tame
• 5/12 Atlanta Fed Wage Tracker April Tame
• 5/24 2pm ET May FOMC minutesDovish
• 5/26 8:30am ET PCE April Tame
• 5/26 10am ET U. Mich. April final 1-yr inflation Tame
• 5/31 10am ET JOLTS April job openings

_____________________________

36 Granny Shot Ideas: We performed our quarterly rebalance on 10/18. Full stock list here -> Click here

______________________________

PS: if you are enjoying our service and its evidence-based approach, please leave us a positive 5-star review on Google reviews —> Click here.