CNBC Senior Markets Commentator.
Markets. Business. Baseball.
Cranky New York parochialism.
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Apr 22, 2024 • 6 tweets • 2 min read
The #MysteryBroker checks in with an extensive investment-outlook report that blends a benign near-term view with what he sees as a very challenging setup for longer-term stock returns.
He was cautious most of last year but turned constructive after the October selloff, says he believes a cyclical bull market began then and will last "until August at least" with most gains occurring "in the first half of the year."
He argues the recent hotter "inflation numbers are likely to cool off over the next few months as will economic growth....Expect first quarter earnings to exceed estimates by at least 5% and for S&P 500 earnings to rebound as expected in second half. Don’t expect the 10-year Treasury to trade above 5% and should recede by the summer if not earlier." Neutral on commodities.
The #MysteryBroker sees the current market as similar to the early '70s, investors paying a huge premium for high-quality stocks. Even in cyclical rotations lately, they prefer high-quality cyclicals. Implicitly, the market doubts there can be sustainable economic growth with unemployment under 4% without rekindling inflation.
Dec 19, 2023 • 11 tweets • 3 min read
The #MysteryBroker re-emerges after a months-long professional hiatus. The post below was the last update. He had been bearish for months, had grown more so by July 31. S&P 500 fell ~10% from there, only re-attaining its July 31 closing level on Dec. 1.
In the interim, #MysteryBroker reached out in mid-October out to say he turned tactically bullish, openly regretted it two weeks later into the ultimate market low, but held on for a seasonal bounce. (Believe it, or don't, whatever - I have the emails. None of it really matters.)
Feb 21, 2023 • 7 tweets • 3 min read
A long #MysteryBroker update overnight boils down like this: He's very skeptical a new bull market is underway, even though it looks like a long multi-month base in the S&P 500 and we got a classic October bottom/midterm tailwinds with some strong breadth.
#MysteryBroker says the market usually "doesn’t give investors a chance to get in during the first four-month thrust," meaning it typically logs a 20%+ gain; this one didn't. He's wary that this could be rerun of the strong Jan '01 and Sept '01-Jan '02 bear-market rallies.
Jan 19, 2023 • 9 tweets • 4 min read
An update from the #MysteryBroker arrived overnight, including a review of his 2022 calls and a generally cautious outlook for this year...
Without getting into all details, last year #MysteryBroker started correctly bearish on bonds, then warmed to them with 10-yr Treasury yield rising toward 3.5%. He still likes Treasuries, thinks the 10-year will approach 2% some time this year, and is avoiding high-yield paper.
Nov 30, 2022 • 8 tweets • 3 min read
A #MysteryBroker update. To recap: MB in recent months has been firmly in the peak-inflation/peak-yield camp, seeing value in Treasuries, believing the Fed was in the process of overtightening into a recession, while seeing the makings of a tactical equity rally in mid-Oct.
The #MysteryBroker now says the stock market's in a fleeting "honeymoon period" where "investors become giddy over signs of the end of increasing inflation and interest rates, while ignoring what is to come on the other side" - probable recession and falling earnings forecasts.
Sep 26, 2022 • 5 tweets • 2 min read
#MysteryBroker fleshes out his call for a market bounce after trimming his hedge Friday.
Mostly about oversold conditions (21-day McClellan Oscillator, AAII bears @ 60%, put/call ratio and open interest p/c extreme lows among "smart money" OEX traders).
The #MysteryBroker concedes the market often bounces at a former low on first try even if the retest ultimately is due to fail. But: "historically if an investor buys at theses levels within a couple of weeks the stock market will be higher even if it declines more" initially.
Sep 13, 2022 • 8 tweets • 3 min read
The #MysteryBroker went to a short-term sell on the market this morning.
No details. Last week he said S&P 500 would likely continue higher into this week. But he's been arguing inflation would fall hard (not yet) and has been concerned Fed is poised to overtighten (maybe?).
Will offer details when available, maybe tomorrow. Meantime just read the rules. Especially the part about me just sharing this stuff because people ask for it.
A #MysteryBroker overnight update points out McClellan Oscillator flashing rare extreme oversold reading Tuesday (seen after big drops in 2010, '11, '18 and '20) that usually triggers short-term 3-5% S&P 500 rallies and further upside follow-through often, though not always.
The #MysteryBroker's "best guess" is the S&P 500 continues to rise into next week, as he expects the inflation reports to come in "favorable." He continues to see inflation falling hard on its own, and worries the Fed will ignore it and overtighten by 75bp the following week.
Aug 24, 2022 • 11 tweets • 4 min read
Catching up on the latest #MysteryBroker dispatch, in which he details several elements of he bull case for stocks from here, while saying that it is not yet his "base case..."
The #MysteryBroker notes the 19% S&P 500 rally (intraday low to high) had some of the elements “necessary for a new bull market to take hold.” Breadth of the rally, leadership by high-beta stocks, credit spreads narrowing. He also likes the continued investor skepticism...
Aug 8, 2022 • 8 tweets • 4 min read
Having most recently argued weeks ago that Street sentiment was way too negative on recession odds, corporate earnings and stock prices, the #MysteryBroker weighs in on the current key market juncture, lays out a few likely scenarios rather than a single high-conviction view...
Before detailing the scenarios, #MysteryBroker sees the ultimate path from here almost wholly dependent on whether the Fed responds to forward-looking inflation indicators that suggest to him inflation is already headed down decisively by moderating its tightening plans - or not.
Aug 7, 2022 • 4 tweets • 2 min read
Stocks have regained almost half of their total decline, but not quite. Several signals of a good bottom and new uptrend triggered, but it’s a close call. The “recession is here” case isn’t disproved, but recent data counter it.
cnb.cx/3JyEZb0
Debate can seem binary - between “It’s a doomed bear-market rally, new lows ahead” and “Bear over, up and away.”
Nuance is better: “This rally might not have the horses to break decisively higher right away, but it’d likely take a lot of fresh macro erosion to break June lows.”
Jul 14, 2022 • 4 tweets • 2 min read
The #MysteryBroker checks in to rail incredulously at the Fed's apparent intent to push ahead with more and bigger rate hikes based on "lagging" CPI numbers in the face of clear market and data indicators "signaling a significant decline in inflation over the next year."
The #MysteryBroker says if the Fed hikes 75-100bp in July and another 50-75bp in September, "a recession is very likely to begin by early next year. The stock market would decline 30 to 35% from the all time high in that scenario." Implies an S&P 500 3100-3300 in this bear case.
Jul 6, 2022 • 5 tweets • 2 min read
In overnight update, #MysteryBroker criticizes the Fed for trapping itself by focusing on gas prices and UMich inflation expectations just as core inflation is rolling over, but still sees risks to earnings and the economy being generally overstated by observers and the markets.
The #MysteryBroker believes earnings should be more resilient than feared given high nominal GDP growth and disappointments are more about underappreciated impact of China lockdowns and pivot away from home/goods spending than true consumer/business stress.
May 16, 2022 • 6 tweets • 3 min read
The #MysteryBroker weighs in after Friday's bounce to say it "likely" marked the low for the current phase of the downturn, sees 4-6-week rally totaling 8-15% in S&P 500 based on some rare oversold indicators and persistent bearish sentiment.
The #MysteryBroker notes the extensive history of S&P 500 declines that ended just short of 20% (as I detailed last week - '90, '98, '11, '18), saying the crucial variable that determines if such a drop goes much further is whether a recession hits within months. He thinks not.
Apr 25, 2022 • 7 tweets • 3 min read
The #MysteryBroker checks in: Pessimism has reached extremes (historic lows in AAII survey bulls, equity fund outflows, his proprietary sentiment gauge), limits immediate downside and improves multi-month risk/reward for stocks given imminent-recession fears he sees as overdone.
The #MysteryBroker thinks the market has probably overshot likely Fed rate-hike path, Treasury yields set to peak within two weeks and ease lower for a couple months. He’s among those who think we’re tracking the 1994 bond-crash/Fed-hiking/volatile-stocks scenario.
Apr 5, 2022 • 5 tweets • 2 min read
The #MysteryBroker checks in to say he's unconcerned by the various Treasury yield curve inversions that have many on edge. History shows plenty of false signals and long lead times before a recession. The 3-mo/10-yr curve may invert early 2023, then maybe a year until recession.
The #MysteryBroker continues to see the economy in decent shape, believes in the shift toward services spending, pent-up auto demand, Earnings are spottier (inflation beneficiaries supporting consensus numbers), but are holding up. Risks are inventory buildup and housing unwind.
Mar 15, 2022 • 6 tweets • 3 min read
A #MysteryBroker update overnight, the first since he recommended buying into the Russia invasion news. The S&P is down a bit since, still above the Feb. 24 intraday low. The West shunning Russian oil/gas was an unforeseen wrinkle. He again says stocks are "close to a bottom."
The #MysteryBroker acknowledges S&P 500 is in a "perfect downtrend" and not grossly oversold yet by standard measures. Yet with his sentiment composite close to levels hit near the end of corrections ion 2011, 2016 and 2018, indicators "sufficiently bearish" to enable a bottom.
Feb 22, 2022 • 4 tweets • 2 min read
I’m off this week but did get a #MysteryBroker update overnight. He’s a buyer into the equity weakness, sees it as essentially a retest of the Jan. 24 low, his sentiment gauge showing a pessimism level last seen near the the late-2018 market low.
The #MysteryBroker says historically markets bottom as an “expected war” begins after stocks were already declining. Little economic risk from Ukraine conflict. Credit, yield curve (3-mo./10-year) and financial-stock outperformance show this is not about coming economic weakness.
Jan 10, 2022 • 4 tweets • 2 min read
Catching up on #MysteryBroker outlook: He came into 2022 expecting moderate S&P 500 gains, upward tilt into May and again in Q4, tougher in between. Opposite the popular "tough 1H, good 2H" call. Sees value, small/mid-cap outperforming. Cyclicals better in first half, then fade.
Note that #MysteryBroker favored value/cyclicals through 2021 and was calling much of speculative tech a bubble back in December 2020. And this is what he said right as it was peaking...
The #MysteryBroker weighed in overnight with an update. While he's nagged by the profound divergence between the Russell 2000 and big-cap indexes and a Fed moving toward tightening, he still believes the market is likely to rally further into year-end...
The #MysteryBroker says the recent shakeout in the market has left some genuine values in parts of the market for the first time since late 2020, mainly in cyclical stocks that have declined significantly due to the Covid resurgence and/or supply chain disruptions.
Sep 20, 2021 • 5 tweets • 2 min read
The #MysteryBroker checked in overnight. Still cautious, mindful of the consistent tendency for weakness from this point in Sept. into early Oct. Likens the backdrop to Sept. 2020: Poor market breadth for many weeks, growth stocks holding up indexes until they no longer could.
The swing toward bearish sentiment in the AAII survey last week and outsize focus on Sept. weakness by pundits gives #MysteryBroker some pause in his correction call. Says hard for stocks to "really break down" (more than a 10% correction) when AAII bears surge like this.
