Assessing the Precarious State of Markets With Marc Chandler (Szn 4, Ep 18)

Published July 6, 2022

Marc Chandler, chief market strategist at Bannock Burn Global FX, joins the podcast to discuss the precarious state of markets and what he is expecting from upcoming releases of key economic data. He also provides a pair of investment ideas for these times, with the understanding that nothing here is to be taken as investment advice.

Content Highlights

The coming week brings a number of crucial economic data around employment and inflation. What to expect (2:50);
“I don’t think we’re in a recession yet. But I think it’s going to be hard to avoid one.” Cracks are appearing and these warrant attention (3:51);
Weekly jobless claims (up Thursday) can be a leading indicator of recessions (5:30);
Non-farm payrolls are up on Friday. What to expect (11:34);
Core inflation is actually receding from highs, but the Fed can’t (and more importantly won’t) declare victory over inflation quite yet (14:42);
Recent days have seen a shift in market sentiment, to where a rate cut is starting to be priced in (17:43);
What is an investor to do here? The guest has two ideas, at opposite ends of the risk spectrum (25:23);

More on the Guest

Website: MarcToMarket.com;
Twitter: @MarcMakingSense.

Quick Highlights From Our YouTube Channel

Transcript

The Yield Curve Inverteth

Published July 5, 2022

The following is an amended form of the Daily Contrarian briefing from July 5. This briefing and accompanying podcast are released to premium subscribers each market day morning by 0700. To subscribe, visit our Substack.

The yield-curve between the 2-year and 10-year just inverted. What this means is the shorter-dated yield (the 2-year in this instance) is actually higher than the longer-dated one (the 10-year). To be specific, the 2-year yield is currently 2.81% while the 10-year is 2.80%.

So there you have it. It’s not the first time this has happened this cycle. In fact, the 2/10 curve inverted as recently as June 14. Also in March. This is one recession predictor that is deemed to be pretty accurate for reasons that are discussed in this Investopedia article.

This yield curve inversion gives us something to talk about today, as things are still mostly quiet after the long holiday weekend. Most of the action this week is back-loaded, with the June jobs report due on Friday.

Markets got some good news around easing of China tariffs over the weekend, but the mood is mostly pretty dour. CNBC reports the outlook for the second half is “not looking good.” A contrarian indicator? Maybe. Or maybe it just isn’t a good idea to fight the Fed?

Americans have apparently started tapping into their savings to cope with inflation. That’s not good, but there is a ready-made boogey man in the Federal Reserve. Lest we forget: the Fed insisted the inflation we were seeing last year was transitory. They’ve changed their tune on this, but the point is they don’t have political leeway to reverse course again — until inflation is well and truly under control (or they have some data to point to that will allow them to ‘declare victory’).

Whatever your views on all this, the truth is nobody has any idea what is going to happen. There are educated guesses but there are also people with a vested interest in pushing a specific narrative. Do your own research, make your own decisions.

The Coming Credit Crunch and Death of Unicorns: Leo Schmidt (Szn 4, Ep 11)

Published April 18, 2022

Leo Schmidt of River Eddy Capital Management rejoins the podcast to discuss the coming credit crunch, its impact on stock market sectors, and where to invest to protect one’s portfolio.

Content Highlights

So-called “unicorn” companies, or the darlings of the VC crowd, and others that cannot generate cashflow, will face a tough reckoning (3:17);
Undermining this is “a complete change of psychology” in terms of velocity of money (6:27);
What if the Fed reverses course? It’s not so simple (8:52);
Oil is a short: “Oil is the ultimate liquid commodity” but there is a place for pipeline stocks… (11:38);
What stocks can thrive in this type of environment? Look first to medical company spin-offs (19:13);
Another area to look: Business development companies, or BDCs. This is a risky part of the market but there is at least one BDC making first-lien loans, which are the safest part of the capital structure… (26:23);
Quick epilogue on China’s latest Covid lockdown. There are ways to play the move away from supply chain issues that result (35:58);