On Thursday the markets put in a nice turnaround session. What we needed was follow through on Friday but alas that would not be provided to the markets. It was the same old culprits – China weakness, falling crude oil prices, fear of Fed and the strong US Dollar – which caused the downdraft. Intel (INTC) reported a good quarter but provided light guidance. Intel is a charter member of the UPOD (under promise over deliver) club. Not helping matters was monthly derivative expiration. In fact, it was quite ugly for most of the session but then, at the exact times when one would expect even more heavy selling, buyers stepped up to do some dip buying.
During this entire year’s sell-off, we have been dealing in a news vacuum, with the exception of the strong December payroll report. This week however, we will have plenty of information to sink our teeth into. The World Economic Forum in Davos Switzerland will take place from Wednesday through Saturday. Throughout the week, earnings kick into high gear. On top of all that is a slew of economic data releases including housing, CPI, Philly Fed, the usual weekly claims, and LEI (leading economic indicators). So, what should we expect from all that?
As far as Davos goes, there will be a whole series of boring and politically slanted presentations. However, what will really matter is what is uttered by the financial ministers and central bankers from around the world, with particular focus on The US, the UK, China, Japan, Germany and ECB. What do I expect? With the next FOMC meeting scheduled for January 27, the world markets are on pins and needles with respect to future FOMC actions. Expect to hear, directly or indirectly, that the FOMC is going to take their foot off the tightening pedal and shift back to neutral. From the ECB, expect more talk about further monetary easing. Chinese official will also try to calm worries about additional currency devaluation and talk up economic stimulus.
When it comes to earnings, the song will remain the same. On average, earnings will better expectations, revenues will be stunted by the strong US Dollar, guidance will be underwhelming and new buybacks will be announced at a rapid pace.
As far as economic data, housing will remain strong, inflation will remain tame, the Philly Fed will send mixed signals and unemployment claims will stay on trend.
The market is due for a bounce. If there is a week when it should come, it will be this one. However, after suffering a stroke and heart attack, the markets are in a fragile state of health and we need to give it time to heal.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC held no positions in stocks mentioned; although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
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