Latest / HPK Provident Advisors: The Weekly Bull / 📈 The Week Ahead: Market Insights from HPK Provident Advisors Episode 1

Transcript

📈 The Week Ahead: Market Insights from HPK Provident Advisors Episode 1 · HPK Provident Advisors: The Weekly Bull

• 0:03
  Michael Kutch, CFA: Hello, happy Labor Day everyone.
• 0:05
  Michael Kutch, CFA: I hope everyone's enjoying some good food and company today.
• 0:08
  Michael Kutch, CFA: So for those of you who don't know me, my name is Michael Kutch.
• 0:11
  Michael Kutch, CFA: I'm the Portfolio Manager here at HBK Provident.
• 0:14
  Michael Kutch, CFA: So I have been doing this the week ahead as a blog post, but I'm also going to do a video version for our clients.
• 0:21
  Michael Kutch, CFA: So this is just a quick summary of what happened last week and what I'm looking for in the economy and markets this week.
• 0:26
  Michael Kutch, CFA: So I'll get right into it.
• 0:28
  Michael Kutch, CFA: Just a quick disclosure.
• 0:29
  Michael Kutch, CFA: Nothing that I say should be taken as a specific recommendation.
• 0:32
  Michael Kutch, CFA: Please consult us or your financial professional regarding your specific situation.
• 0:39
  Michael Kutch, CFA: So this week, let me start off with pulling up a chart of the S&P 500.
• 0:44
  Michael Kutch, CFA: So we haven't had much price action this week.
• 0:48
  Michael Kutch, CFA: We've yet to eclipse the highs of August 14th or get past the highs last Friday.
• 0:54
  Michael Kutch, CFA: Friday was a big up day following remarks from Fed Chair Jerome Powell at the Jackson Hole Symposium.
• 0:59
  Michael Kutch, CFA: So what markets responded to in such a positive way were when he flagged that there's potential weakness to their labor market mandate.
• 1:09
  Michael Kutch, CFA: So what that means and why markets celebrate that is if the labor market weakens, then the Fed's likely to cut in September, which is what markets are pricing in right now.
• 1:20
  Michael Kutch, CFA: So keep an eye on that.
• 1:22
  Michael Kutch, CFA: We are seeing a negative divergence in the RSI indicator, which is in this purple box here.
• 1:28
  Michael Kutch, CFA: What that means is momentum is not really keeping up to price action.
• 1:32
  Michael Kutch, CFA: So that gives me sign for some concern that we might be in store for a pullback, and we have been anticipating that for about three weeks now.
• 1:42
  Michael Kutch, CFA: Just with valuations where they're at, we've had such a strong run from the April lows that it would just be healthy for a pullback here.
• 1:51
  Michael Kutch, CFA: September is typically a weak month out of the year.
• 1:54
  Michael Kutch, CFA: Now those metrics change a little bit if there's a good amount of stocks above their 200-day moving average, which they are in this environment.
• 2:01
  Michael Kutch, CFA: So maybe we don't see much weakness.
• 2:03
  Michael Kutch, CFA: But I think it would be healthy for a 4% to 7% pullback and we have raised some cash to be able to take advantage of that pullback and at least at this point we're buyers in that environment, unless something drastically changes Now.
• 2:17
  Michael Kutch, CFA: Some good news is we have seen the market broadening out.
• 2:21
  Michael Kutch, CFA: This is the equal weight S&P 500.
• 2:24
  Michael Kutch, CFA: So over the last two weeks that's been pretty healthy.
• 2:27
  Michael Kutch, CFA: Also, rates have been pretty cooperative, so that's a good thing.
• 2:31
  Michael Kutch, CFA: The 10-year and the short end of the curve, have both broken that uptrend line.
• 2:35
  Michael Kutch, CFA: Now the 10-year.
• 2:36
  Michael Kutch, CFA: If that continues to drop, typically it's a good thing for equities, just because that's a reflection of the lending market.
• 2:47
  Michael Kutch, CFA: So if companies have more access to capital it tends to stimulate the economy.
• 2:53
  Michael Kutch, CFA: But if that's really dropping because of economic weakness and we're not there yet but then the market would get concerned.
• 3:01
  Michael Kutch, CFA: So next week is a big one in terms of economic data.
• 3:05
  Michael Kutch, CFA: Tuesday is the ISM manufacturing numbers, so that's expected to see a slight uptick, however still in contractionary territory.
• 3:13
  Michael Kutch, CFA: Wednesday is the job openings, as well as ADP jobs, that I believe.
• 3:19
  Michael Kutch, CFA: And then Thursday is ISM services.
• 3:22
  Michael Kutch, CFA: That is also expected to tick up a little bit, but that's not too far into expansionary territory.
• 3:29
  Michael Kutch, CFA: So that's really been what's been holding up the market.
• 3:33
  Michael Kutch, CFA: I mean the economy, the services spending has been very strong.
• 3:37
  Michael Kutch, CFA: Now if that starts to weaken at the same time where tariffs are taking effect and maybe having an impact on goods purchases, it could be a sign for economic weakness and something to watch out for.
• 3:48
  Michael Kutch, CFA: And then Friday is the big one.
• 3:49
  Michael Kutch, CFA: We have non-farm payrolls.
• 3:51
  Michael Kutch, CFA: Expectations are for 100,000.
• 3:53
  Michael Kutch, CFA: That's above last month's 75,000.
• 3:55
  Michael Kutch, CFA: But make sure you pay attention to the revisions I know I will be.
• 4:00
  Michael Kutch, CFA: The prior monthly report had 256,000 downward revisions to the prior two months.
• 4:07
  Michael Kutch, CFA: So what that means is, instead of the three-month average being around 150,000, we actually came in about 35,000.
• 4:16
  Michael Kutch, CFA: So hopefully that trend doesn't continue.
• 4:18
  Michael Kutch, CFA: On the plus side, wage growth has been very strong, so that's a good sign for labor market.
• 4:23
  Michael Kutch, CFA: Jobless claims remain very low, so that means hiring slowing, but we're not seeing layoffs, so that's an environment that's sustainable, at least for now.
• 4:47
  Michael Kutch, CFA: Less people entering the labor force.
• 4:48
  Michael Kutch, CFA: Immigration is way down.
• 4:49
  Michael Kutch, CFA: So if job openings come down in tandem with labor force participation, you can see that unemployment rates stay around the 4.2% level.
• 4:55
  Michael Kutch, CFA: So that's historically the lower end, so that's a good thing.
• 4:58
  Michael Kutch, CFA: We'll be back on Friday for our Facebook Friday Live, so tune in at 1230.
• 5:04
  Michael Kutch, CFA: We also have a seminar that's scheduled on social security for September 24th at 5pm, so registration is open.
• 5:16
  Michael Kutch, CFA: We have an event link on our website.
• 5:18
  Michael Kutch, CFA: You can also register via Facebook, so make sure you tune into that if you're interested in social security.
• 5:25
  Michael Kutch, CFA: Again, I hope everyone has a wonderful Labor Day and I hope you guys tune in on Friday, all right?