Big data week ahead. Consensus skews toward a "hotter" Oct Core CPI MoM on 11/14, which is contrarian positive. Baby rally intact and positioning still key (and favorable.)

We discuss: We discuss how this is a big data week ahead, but the most important is Oct CPI on 11/14.  The “baby rally” still intact and positioning remains important to equity direction and it remains cautious.

Please click below to watch our Macro Minute (Duration: 5:54).

I spoke at the Texas CFA Society Investor Summit this past Friday (11/10) in Dallas. This was a well attended event and included Robert Kaplan, former Dallas Fed President, and Dan Niles, among others. I was struck by the level of cautiousness and general bearish leanings of the attendees, based upon many conversations and also questions during my presentation.

• The primary driver of cautiousness is the overall sense of gloom around a few factors:
  – geopolitical risks around Russia and Iran and China
  – rising Federal debt burden
  – retirement of baby boomers and poor demographics
  – view that inflation lingering 3.5% to 4.0% inflation
  – the risk of inflation accelerating if the Fed doesn’t stay vigilant
  – looming commercial real estate crisis
• A CFA member even asked me, “Tom, are you only bullish because it is good for business?” — this is a bit ironic, because our research is evidence-based. Not bullish-based.
• The point of all this is to confirm the peculiarity of how entrenched bearish sentiment remains. It is surprising because we are in seasonally positive the final weeks of 2023. And the S&P 500 is up +15% YTD. Yet, investors seem to want to quibble with our work and dismiss our views as “out of sample” because they are bearish.
• I have researched markets for over 30 years. And I am struck how investors “default” stance on equities is bearish for stock ideas and for the market overall. Since 2009, I can only recall maybe 2 years, where investors were positively inclined on equities. Yet, since 2009, the S&P 500 has produced positive gains 13 of those 15 years. So, see my point? I mean arguably, the bubble today remains “the bear bubble” — the entrenched belief that equities need to fall 30% to 40% to properly reflect the doom out there.
• The “baby rally,” which we alerted our clients on 11/1 before the open, has gained +7.2% in the past few weeks. On 11/1, our rationale for expecting a “baby rally” to ensue was the bearish positioning of institutional investors, CTAs and retail investors as well as the low level of leverage.
• These factors are still in place:
  – GS FICC desk, client net exposure is in “just the 39th percentile”
  – GS prime brokerage desk notes “hedge funds increased short for 14 consecutive weeks”
  – the longest streak in history
  – Sentiment trader notes past 3 sessions, options bought more puts and calls
  – over past 25 years, 26 of 29 instances stocks higher 2 months later
• In contrast to last week’s “light macro,” the coming week has lot of incoming macro data:
  – Tue 11/14 8:30am ET: Oct. CPI Core MoM      +0.30%
  – Wed 11/15 8:30am ET: Oct. Retail Sales Ex-Autos/Gas    +0.20%
  – Wed 11/15 8:30am ET: Oct. Core PPI MoM    +0.30%
  – Thu 11/16 9:15am ET: Oct. Industrial Production MoM    -0.30%
  – Thu 11/16 10:00am ET: Nov. NAHB Housing Index     40
  – Thu 11/16 4:00pm ET: Sept TIC Flows
  – Fri 11/17 11:00am ET: Oct. Housing Starts    1450k
• Of these, the most important is the October CPI report. Headline is expected to be soft due to lower gasoline prices. And food prices are finally beginning to cool. It is natural to say that a soft CPI Core MoM print will be a welcome development.
  – Of the 46 economist estimates
  – 7 are above +0.30% consensus
  – 4 are below +0.30% consensus
  – meaning, the Street is leaning towards a high-side reading above +0.3%
• In addition, the APEC Summit is this week in San Francisco. And US and Chinese leaders meet. So there could be some positive news from this summit.
• I don’t expect much fallout from Moody’s changing USA sovereign rating to “negative” from “stable” — the issues are known. And risk positioning more favorable today compared to early August when Fitch downgraded USA.
• Thus, there is a slight positive bias for equities heading into Tuesday’s CPI print. If there is a softer than consensus reading, equities could see a gain. But I don’t have conviction this is the case.

Bottom line: Bias remains positive into YE and we continue to “buy the dip”

We are finding more reasons to be constructive into year-end than we were a few weeks ago. Namely, economic momentum has slowed in a way that has become supportive of softer inflation.

• Seasonals are positive into YE and this remains the case
• Investor positioning continues to be cautious, even if there is some unwind
• The Texas CFA summit really underscored how entrenched negativitiy remains
• However, keep in mind Mark Newton, Head of Technical Strategy, remains somewhat cautiousdue to poor market breadth and some cycle factors
• We favor FAANG/Technology into YE. But we also expect market breadth to begin improving. This may not happen until 2024.

Key incoming data November

• 11/01 9:45am ET S&P Global PMI October Final Tame 
• 11/01 10am ET JOLTS Job Openings September Mixed
• 11/01 10am ET October ISM Manufacturing Tame
• 11/01 10am ET Treasury 4Q23 Quarterly Refunding Press Conference Tame
• 11/01 2pm ET FOMC Rate Decision Dovish
• 11/02 8:30am ET: 3Q23 Nonfarm Productivity Tame
• 11/03 8:30am ET October Jobs Report Tame
• 11/03 10am ET October ISM Services Mixed
• 11/07 9am ET Manheim Used Vehicle Index October Final Tame
• 11/10 10am ET U. Mich. November prelim Sentiment and Inflation Expectation Hot
• 11/14 8:30am ET October CPI 
• 11/15 8:30am ET October PPI
• 11/15 8:30am ET November Empire Manufacturing Survey 
• 11/15 8:30am ET October Retail Sales Data
• 11/16 8:30am ET November New York Fed Business Activity Survey
• 11/16 8:30am ET November Philly Fed Business Outlook Survey 
• 11/16 10am ET November NAHB Housing Market Index 
• 11/17 9am ET Manheim Used Vehicle Index November Mid-Month
• 11/21 2pm ET Nov FOMC Meeting Minutes
• 11/22 10am ET: U. Mich. November final Sentiment and Inflation Expectation
• 11/24 9:45am ET S&P Global PMI November Prelim 
• 11/27 10:30am ET Dallas Fed November Manufacturing Activity Survey
• 11/28 9am ET November S&P CoreLogic CS home price 
• 11/28 10am ET November Conference Board Consumer Confidence
• 11/29 8:30am ET 3QS 2023 GDP
• 11/29 2pm ET Fed Releases Beige Book
• 11/30 8:30am ET October PCE

Key incoming data October

•  10/2 10am ET September ISM Manufacturing Tame
•  10/3 10am ET JOLTS Job Openings August Hot
•  10/4 10am ET September ISM Services Tame
•  10/6 8:30am ET September Jobs Report Mixed
•  10/6 9am ET Manheim Used Vehicle Index September Final Tame
• 10/10 11am NY Fed Inflation Expectations Mixed
•  10/11 8:30am ET September PPI Mixed
•  10/11 2pm ET Sep FOMC Meeting Minutes Tame
•  10/12 8:30am ET September CPI Mixed
•  10/13 10am ET U. Mich. September prelim 1-yr inflation Mixed
•  10/16 8:30am ET October Empire Manufacturing Survey Tame
•  10/17 8:30am ET October New York Fed Business Activity Survey Tame
• 10/17 8:30am ET September Retail Sales Data Hot
•  10/17 9am ET Manheim October Mid-Month Used Vehicle Value Index Tame
•  10/17 10am ET October NAHB Housing Market Index Tame
• 10/18 8:30am ET September Housing Starts Tame
• 10/18 2pm ET Fed releases Beige Book Tame
•  10/19 8:30am ET October Philly Fed Business Outlook Survey Tame
• 10/19 10am ET Existing Home Sales Tame
• 10/19 12pm ET Fed (including Powell) at Economic Club of New York
•  10/24 9:45am ET S&P Global PMI October Prelim Tame
•  10/26 8:30am ET 3Q 2023 GDP Advance Strong
•  10/27 8:30am ET September PCE Tame
•  10/27 10am ET Oct F UMich Sentiment and Inflation expectation Tame
•  10/30 10:30am ET Dallas Fed September Manufacturing Activity Survey Tame
• 10/31 8:30am ET 3Q23 Employment Cost Index Mixed
•  10/31 9am ET August S&P CoreLogic CS home price Mixed
•  10/31 10am ET October Conference Board Consumer Confidence Tame

Key incoming data September

•  9/1 8:30am ET August Jobs Report Tame
•  9/1 10am ET August ISM Manufacturing Tame
•  9/6 10am ET August ISM Services Mixed
•  9/6 2pm ET Fed releases Beige Book Tame
•  9/8 9am ET Manheim Used Vehicle Index August Final Tame
•  9/8 2Q23 Fed Flow of Funds Report Tame
•   9/13 8:30am ET August CPI Mixed
•  9/14 8:30am ET August PPI Tame
•  9/15 8:30am ET September Empire Manufacturing Survey Tame
•  9/15 10am ET U. Mich. September prelim 1-yr inflation Tame
•  9/18 8:30am ET September New York Fed Business Activity Survey Tame
•  9/18 10am ET September NAHB Housing Market Index Tame
•  9/19 9am ET Manheim September Mid-Month Used Vehicle Value Index Mixed
•  9/20 2pm ET September FOMC rates decision Market saw Hawkish
•  9/21 8:30am ET September Philly Fed Business Outlook Survey Mixed
•  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 Manufacturing Tame
• 8/1 10am ET JOLTS Job Openings Jun Tame
• 8/2 8:15am ADP National Employment Report Hot
• 8/3 10am ET July ISM Services Tame
• 8/4 8:30am ET July Jobs report Tame
• 8/7 11am ET Manheim Used Vehicle Index July Final Tame
• 8/10 8:30am ET July CPI Tame
• 8/11 8:30am ET July PPI Tame
• 8/11 10am ET U. Mich. July prelim 1-yr inflation Tame
• 8/11 Atlanta Fed Wage Tracker July Tame
• 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 Survey Positive
• 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 Survey Tame
• 8/29 9am ET June S&P CoreLogic CS home price Tame
• 8/29 10am ET Aug Conference Board Consumer Confidence Tame
• 8/29 10 am ET Jul JOLTS Tame
• 8/31 8:30am ET July PCE Tame

Key incoming data July

• 7/3 10am ET June ISM Manufacturing Tame
• 7/6 8:15am ADP National Employment Report Hot
• 7/6 10am ET June ISM Services Tame
• 7/6 10 am ET May JOLTS Tame
• 7/7 8:30am ET June Jobs report Mixed
• 7/10 11am ET Manheim Used Vehicle Index June Final Tame
• 7/12 8:30am ET June CPI Tame
• 7/13 8:30am ET June PPI Tame
• 7/13 Atlanta Fed Wage Tracker June Tame
• 7/14 10am ET U. Mich. June prelim 1-yr inflation Mixed
• 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 Index in-line
• 7/18 Manheim July Mid-Month Used Vehicle Value Index Tame
• 7/25 9am ET May S&P CoreLogic CS home price Tame
• 7/25 10am ET July Conference Board Consumer Confidence Tame
• 7/26 2pm ET July FOMC rates decision Tame
• 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 Manufacturing Tame
• 6/2 8:30am ET May Jobs report Tame
• 6/5 10am ET May ISM Services Tame
• 6/7 Manheim Used Vehicle Value Index May Tame
• 6/9 Atlanta Fed Wage Tracker April Tame
• 6/13 8:30am ET May CPI Tame
• 6/14 8:30am ET May PPI Tame
• 6/14 2pm ET April FOMC rates decision Tame
• 6/16 10am ET U. Mich. May prelim 1-yr inflation Tame
• 6/27 9am ET April S&P CoreLogic CS home price Tame
• 6/27 10am ET June Conference Board Consumer Confidence Tame
• 6/30 8:30am ET May PCE Tame
• 6/30 10am ET June Final U Mich 1-yr inflation Tame

Key data from May

• 5/1 10am ET April ISM Manufacturing (PMIs turn up) Positive inflection
• 5/2 10am ET Mar JOLTS Softer than consensus
• 5/3 10am ET April ISM Services Tame
• 5/3 2pm Fed May FOMC rates decision Dovish
• 5/5 8:30am ET April Jobs report Tame
• 5/5 Manheim Used Vehicle Value Index April Tame
• 5/8 2pm ET April 2023 Senior Loan Officer Opinion Survey Better than feared
• 5/10 8:30am ET April CPI Tame
• 5/11 8:30am ET April PPI Tame
• 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 minutes Dovish
• 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

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