The Resilient Consumer – by Justin Vaughn

(Justin Vaughn, Editor, Options Trading Report)

The Giants Dragged The Market Lower…Last week both Nvidia and Apple suffered heavily. After Nvidia’s skyrocketing performance upon extremely good earnings for the quarter, the stock dropped 6% in two sessions as profit taking took a toll. Apple fell over 6% in two sessions after a dethroning, as China’s government mandated central government’ officials stop using the iPhone, with more levels of government to be curtailed in the future. As China is one of the world’s largest users of the iPhone, deep concerns clouded Apple’s future growth prospects, and thusly affecting the stock,

Monday’s market was ‘upbeat’ retaking losses incurred the past several sessions. Even though indices were modestly positive, the S&P 500 was up 0.7% and the Dow Jones Industrial Average up 0.3%. The technology heavy Nasdaq Composite led the upturn, up 1.1%. The market appeared to have overcome many recent negative events with renewed across- the-board-buying. A majority of investors and traders feed strongly that the Fed will skip a raise in September with raises coming in October and November. The CPI, PPI, consumer spending numbers and several reports gauging the consumer habits due out in the next week could influence the Fed’s thinking a great deal. “The market is hypersensitive about that,” said Quincy Crosby, chief global strategist for LPL Financial. “It’s not a net positive for equities. The CPI (Consumer Price Index) report is a leading indicator and a heavy influencer in the decision making board of governors, so much so that often the reaction of the general market can be overwhelmingly positive or the opposite. The Federal Reserve ‘rate setting’ committee meeting next week will digest all the numbers.

As the Nasdaq Composite has illustrated all this year, high techs have ruled the marketplace with an enormous gain of 35% so far outdistancing the S&P 500 which showed a 16% gain. Oil continues to prod along, up 1.6% to the $90.00 range, on Wednesday, lifting gasoline prices higher and higher, thanks to the Russians and Saudi’s reduction in production.

Stocks were hot at opening on Thursday as consumer retail sales were strong, growing by 0.6% for August over July as economists were looking for a ‘mere’ 0.1%, and labor issues were insignificant. As the “Resilient Consumer” faces any and all marketplace obstacles (Price, Availability) the economics continue to balance out–the consumer is ‘king.’ At the end of the day all indices were higher with the Dow Jones Industrial Average a healthy 330 points.

Just A Good Old Fashioned ‘BULL”market…The Japanese Stock market, The Topix index has posted enormous gains this year of 25%, besting the U.S. S&P 500’s 17%. The Stoxx Europe 600, and the Shanghai Composite have risen 7.4% and 1.7% respectively this year. Japan, the world’s third largest economy has ‘blown-away’ any thoughts of an economic slowdown, or recession…or a Bear market. Domestic and Foreign investors alike have relished in scoring big ‘hits’ in what was at one time a depressed and unwelcome market, hitting no records since 1989. According to Jeff Atherton, head of Japanese equities at Man GLG, the discretionary investment unit of hedge-fund manager Man Group noted: “It’s probably in my opinion the best market we’ve had in decades really,” Mr. Atherton said. As the yen strengthens against the dollar the American investor is financially attracted to investing in Japan, again. As valuations of Japanese corporations improve and profits improve, U.S. investment will certainly expand.

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Randy Gwirtzman, a portfolio manager at Baron Capital, WSJ “The stock market has been running in place, waiting to see light at the end of the tunnel,” said Mr. Gwirtzman. “Obviously, you hope it’s not an incoming train.”

Samuel Dedio, chief investment officer at Patrumin Investors, WSJ “The market is just grinding until then,” said Mr. Dedio “The last month hasn’t been great,” reacting to future rate hikes in November and December. Dedio added, “With markets choppy and the economic outlook uncertain,” Dedio said his approach can increasingly be captured with three words: looking to 2024.

Rolland Morris a commodity strategist and portfolio manager at VanEck, Barron’s Commenting on China’s commodity situation. “Concerns about the demand outlook have weighed on commodities all year,” says Mr. Morris. While performance has been lackluster, the asset class has held up fairly well, “ he adds. “If you think of the fundamental headwinds we’ve had this year, it’s pretty impressive actually,” he says. China’s growth has been incredibly disappointing, and Europe’s in a recession.”

Dan Genter, chief executive and chief investment officer at Genter Capital Management, WSJ You’re finally starting to see a more intelligent look at artificial intelligence, said Mr. Genter.