Nolte Notes 11.29.21

November 29, 2021

The “Nu” variant of the Covid virus is making the rounds in South Africa and has put the fear back into investors that we are once again heading for economic lock/shut down. Friday’s trading is usually very quiet with a few folks coming in to trade a bit and head back home to finish off the Thanksgiving leftovers. However, this year, trading was the worst in 70 years as investors sold anything that benefits from an open economy. Even energy prices fell 10%. The economic data from earlier in the week was solid, with the weekly jobless claims the lowest since 1969 and consumer spending still robust. That all got tossed out the window Friday. The weekend should provide some information that may help investors assess the economic and markets risks heading into December. As usual, technology did better, and bond prices rallied as investors warmed to working at home longer and a Fed that is not likely (now) to be raising rates. If the focus turns more toward the latest variant, then the economic data won’t matter as it will be considered “old news”.

The markets have been trading poorly over the last two weeks, with only one day showing more stocks rising than falling. Friday was the culmination of a bad string, with nine times more declining volume than advancing on the NYSE. The last occurrence was back in September, just before the markets bottomed, resulting in a big October run. At least in the short-term, the selling may have peaked. That doesn’t mean stocks trade higher but expect more ragged trading as we get deeper in the Christmas season. Much of the trading next week will likely center on the path of the new Covid variant. If it is determined to be relatively mild, stocks could regain much of the losses. However, if it poses more risks, then stocks could trade lower still. The employment figures will end the week. The report should be very good and could bolster the markets. Although stocks may be once again beholden to the path of the virus.

As stocks declined, bonds rallied, and interest rates declined. Investors are now expecting the Fed to slow down their pace of tapering their bond purchases and are willing to keep interest rates low. The yield curve has continued to flatten and is now the flattest in eight months. One other concern is the high yield spreads, which are widening. This combination, were it to continue for a few more weeks, could put additional pressure on stocks. For bond investors, treasuries will likely also be a safe port in a storm. The decline in interest rates is likely to continue as commodity prices are showing more signs of rolling over as well. If demand for goods and services wanes in the coming months, prices (and inflation) are likely to moderate.

Friday’s decline was across the board and left few parts of the market unscathed. As mentioned above, the bond market is beginning to signal that stocks could be facing some headwinds in the coming months. Historically, when we see the difference in yields between high yield bonds and treasuries widen out, the stock market runs into trouble down the road. The lead time is anywhere between three months to over a year, so it makes sense to begin watching the markets a bit more closely. The final part of the “market signal” is the flatter yield curve. When the difference between the two- and ten-year yields on treasuries begins to narrow, it is a sign that financial conditions are beginning to tighten. Again, this is not a call for the end of the bull market but is worth keeping an eye on in the coming months. Whenever the markets decide they have had enough, there are likely to be a few hiding places. Better parts of the market will likely be those that have not really participated over the past year, like value and international holdings.

Whether the new variant is at the center of the markets concern or a Fed that may be making a policy mistake, the markets are beginning to pay attention. If things begin getting rougher, treasuries will be a good hiding place.

The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable but are opinions and do not constitute a guarantee of present or future financial market conditions.

2:30

SVP Paul Nolte Interviewed By TD Ameritrade 11.23.21

TD Ameritrade interviews Paul Nolte, SVP & Sr. Portfolio Manager

Kingsview SVP Paul Nolte discusses how the U.S. Dollar has powered higher, and the possibility of seeing 95, 96ish, or even 100 on the Dollar Index in the next few weeks. He also talks about the idea that the markets are happy with the status quo of Fed Chair Powell and points out that gold (/GC) has been relatively rangebound in recent weeks.

Click here to watch the interview

9:45

SVP Paul Nolte Interviewed on WGN Radio 11.23.21

Kingsview SVP Paul Nolte discusses slipping Asia stock markets, the shift of U.S. markets toward technology, and more.

Click here to listen to the interview.

7:13

SVP Paul Nolte Interviewed on WGN Radio 11.18.21

Kingsview SVP Paul Nolte discusses weekly jobless claims, stock market performance, public sentiment about inflation, and why retail sales are jumping in advance of Christmas.

Click here to listen to the interview.

5:02

SVP Paul Nolte Interviewed on WGN Radio 11.16.21

Kingsview SVP Paul Nolte discusses how despite a slight drop, the stock still performed strongly during this quarter. He also talks about how consumer reports show that people are still spending at places like Walmart and Home Depot.

Click here to listen to the interview.

5:18

Portfolio Manager Insights | Weekly Investor Commentary – 11.17.21

Click here for the full commentary.

PORTFOLIO MANAGER INSIGHTS
WEEKLY INVESTOR COMMENTARY | 11.17.21
Investment Committee

Perhaps the biggest side effect of the rapid economic recovery is the historic number of job openings across the country. This has led to a wave of individuals quitting their jobs in search of greener pastures, a phenomenon that has been dubbed the “Great Resignation.” Historically, this is often what happens after economic shocks as many find new work that best utilize their skills. While this is great news for many, especially those who can command higher pay or benefits, it also highlights challenges for businesses and the economy. What does the Great Resignation mean for economic growth and investment portfolios in the years ahead?

The labor market affects all investors in many ways. The most obvious manner is that it directly impacts our personal lives, in addition to those of our families, friends and neighbors. For instance, whether or not inflation-adjusted wages have kept pace is a core issue in the wealth inequality debate. It’s no secret that both the 2008 global financial crisis and the pandemic worsened these effects.


Job openings and turnover are near record highs

KEY TAKEAWAYS:

Key Takeaway: 
1. Job openings are near historic levels. This has prompted many to quit their jobs in search of better opportunities.

In addition, work is more than a paycheck. Right or wrong, it often defines who we are and can be an important part of achieving personal fulfillment. While this effect is not directly financial in nature, it does affect societal and economic trends.

Thus, one of the most difficult challenges for the economy over the past two decades has been the decline in the “labor force participation rate.” This occurred as large numbers of working-age people gave up on finding jobs. The participation rate peaked in 2000 and has been falling due to a number of factors including an aging population, globalization and technology. These latter factors have allowed for goods and services to be produced elsewhere and with fewer workers. Especially when the job market is otherwise stagnant, it is easy to become discouraged and then give up altogether.


Long-term unemployment is falling

KEY TAKEAWAYS:

1. One group that has benefited from these trends is those who have been unemployed for half a year or longer. These long-term unemployed are fewer today due to the economic expansion and the sheer amount of hiring activity across industries.

In the long run, this can create labor shortages in certain industries. In the short-term, however, job openings being near record levels – 10.4 million across the country in September – is positive news. This means that positions are available and businesses would like to hire at the fastest rate in history. That the quits rate has accelerated alongside openings to 4.4 million per month means that many are successfully finding attractive jobs or are confident they can find them quickly.

The caveat is that not all jobs are created equal. The fact that these positions are open means that businesses are having trouble finding enough qualified candidates in their industries. This may mean they don’t have the right skills, especially in high-tech sectors, aren’t in the right geographic location, or that there are other mismatches. Like other supply chain bottlenecks plaguing all businesses, a shortage of qualified workers can harm growth and expansion plans.


Participation rates have stabilized

KEY TAKEAWAY:

1. Unfortunately, the labor force participation rate, which measures the number of people who want to work, is still very low. This measure has been declining for decades due to a variety of factors which were worsened by the pandemic.
2. Many hope that the level of job openings can help to get workers off the sidelines and back into great roles.

The hope is that, over time, job openings entice working-age people to come back into the labor force and the participation rate rises. Workers might re-train to match high-growth areas and wages might adjust based on hiring demand. This could help to accelerate economic growth in addition to improving personal financial situations.

From the perspective of long-term investors, the labor market is a broad signal of economic health. It’s for this reason that investors watch the monthly jobs report so closely. The fact that unemployment has fallen significantly, job openings are at records, wages are picking up, individuals are finding better opportunities, and labor force participation has stabilized are all positive signs. Below are three insights that can help investors better understand today’s job market shifts.

Historical references do not assume that any prior market behavior will be duplicated. Past performance does not indicate future results. This material has been prepared by Kingsview Wealth Management, LLC. It is not, and should not, be regarded as investment advice or as a recommendation regarding any particular security or course of action. Opinions expressed herein are current opinions as of the date appearing in this material only. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate their ability to invest for the long term. Investment advisory services offered through Kingsview Wealth Management, LLC (“KWM”), an SEC Registered Investment Adviser. (2021)

3:00

CIO Scott Martin Interviewed on Fox News 11.12.21 – Your World With Cavuto

Program: Your World with Cavuto
Date: 11/12/2021
Station: Fox News Channel
Time: 4:00PM

NEIL CAVUTO: Let’s take a look at the corner of Wall and Broad today, all the major market averages up on the day, but down on the week. What is interesting to discuss as the markets continue to hum along bumpy days notwithstanding, is what is driving it right now. And it could be again, this is on the week we were down, but we had appreciable advances on the day again on talk that maybe this package, the big one, the one point eighty five trillion dollar one doesn’t get done this year might be even dicey for next year. Now we’re coming to discover that a lot of the tax hikes that a lot of folks were fearing might not materialize either. Or at least they’re being watered down. Welcome news to Scott Martin, the Kingsview Asset Management market watcher here. Now to weigh in Scott, could some of the market’s resilience be the growing expectation that this package won’t be what they feared if it comes to pass at all?

SCOTT MARTIN: Yeah, it definitely could be. I mean, you look at the infrastructure plan itself over the last several months, it’s come down in price. I mean, I guess we’re kind of lucky that it’s just a nose about a trillion because it started well above two trillion. I think Biden wanted even higher than that. So I think you’re right. I think the market is starting to see maybe through the clouds here that maybe a lot of this stuff isn’t going to be as onerous as feared. But the reality is this we still don’t have it paid for Neil, and we’re coming up on 30 trillion of dashiell debt. We still don’t have a tax plan in place to cover a lot of the prices or covers at least a lot of the cost of this thing. So with respect to how the Biden administration not only sells it to Americans but pays for it, that’s really where I think things come out in the wash when we see what the markets do in response and

CAVUTO: very strange sort of an upside down settlement in terms of cobbling this together. Scott, where you probably heard that they want to get salt in this, that is the lift the limitation on state and local taxes from ten thousand maybe as high as 80000 or more. The beneficiaries will be the very rich who were supposed to get gouged by this in the first place. That’s not sitting well with a lot of Democrats. I’m wondering if that’s a sign this thing could look bumpy.

MARTIN: Yeah. And I think if you look at the impacts that the inflation situation has had on the lower and middle-class Americans that Biden professed to absolutely protect and the overall economy, those are the folks that are actually suffering big-time from what’s happening in the administration. So with respect to how they’re handling things, and as you mentioned earlier, with respect to going out and spending over the holidays, filling up your car with gas, buying things for the kids, a lot of Americans are seeing the pinch that the inflationary craze is having on their wallets.

CAVUTO: Are they growing frustrated right now that whatever gains they’re seeing in wages and the administration’s argue that that’s the underlying strength in the economy and this supply and demand issue is is really a reflection of the strong economy that’s tough to sell people who are maybe earning more, but paying out more.

MARTIN: Yes, and President Biden has said that this is actually a wage phenomenon with respect to how strong the job market has been. That’s partially true, but if you look at the inflation rate and its increase over the last several months, it’s well outpacing wage increases. So if you’re somebody that’s making more wages than you were, say than the pre-pandemic, you’re seeing higher prices on what you’re spending. So that gap is definitely widening. And something that you’re going to feel definitely over the holidays.

CAVUTO: All right. We’ll see what happens. Got very good. Catching up with you. Scott Martin.

3:15

CIO Scott Martin Interviewed on Fox News 11.12.21

Kingsview CIO Scott Martin discusses finding the things the market is leaving behind, and adding to a portfolio during a pullback.

Program: Making Money with Charles Payne
Date: 11/12/2021
Station: Fox Business News
Time: 2:00PM

CHARLES PAYNE: Joining me now. Market watchers Scott Martin and Ryan Detrick and Scott, you know, the theme for the day really is for twenty twenty one of these new opportunities, I’m talking investing versus maybe the traditional approach. You know, I’ve always seen you as a sort of an older school guy, but I know recently and bought you sold Amazon and you bought Netflix. And some people were saying, Golly, why would you do that? It’s been absolutely huge. Is that an example? Maybe now some of these newer names starting to emerge, not the fang names per se, but maybe a new set of names starting to emerge that people should be aware of.

SCOTT MARTIN: Yes, trading my age, I guess. Charles, you know, with respect to making some moves that are just frankly out of the box a little bit because nobody would have thought to sell Amazon in the spring. But if you look at that, like you said versus Netflix and video was part of that trade too. That was a great move. As well as that we made. And that’s just, I think, Charles, you know, kind of letting go of the traditional, like you said. I mean, some of the fang names have obviously been part of our portfolios for a long time, and it’s time to roll some of those out. And I think find some opportunities in some of the names of either people aren’t talking about or frankly, folks are hating on as it’s pulling down the stock price in some of these names that are coming down to levels where they’re very attractive, and that’s when you have to take off things that are at their all time highs.

CHARLES PAYNE: Ryan, of course, you know, the stock market, the history of the market better than anyone. This combination that we’re dealing with right now. Have you seen a time? OK, you’ve got inflation that’s rocketing higher at the same time, you’ve got slumping sentiment and then you’ve got this runaway rally. I mean, that seems like an odd combination to a lot of people looking at this from the outside.

RYAN DETRICK: Does Charles before I go there? That was a great answer by Scott. Turns out Scott and I are both from Springfield, Ohio. We went to the same elementary school, so he ever had that on your show. But oh, Springfield, Ohio, on the map today. Now. But anyway, Charles, you’re right. I mean, honestly, no, we’re we never really quite seen a scenario where inflation’s high confidence is low and stocks are up. But I love what Jim just pointed out when when your confidence is low, that tends to be a time you want to be an investor. But what have we seen before that we know the playbook gets when earnings are this strong earnings of the S&P. We’re supposed to be one sixty five at the start of this year. We’re looking at probably 208. That’s like a 25 percent increase in the expected earnings. How much is the S&P up this year? About 25 percent stocks are actually cheaper today than the were at the start of the year. So as long as we have that tailwind, which we think is still the case, we’d still think your stocks are going to keep beating bonds and his bull market still has some legs left to it. No, I

PAYNE: love that you bring that up. You know, there’s always that debate over cheap and you know and value and you know, people aren’t factoring that in, and that’s an important point. But you just said it. It feels like the fix is in, at least for the rest of the year. Is there anything that could change that, Ryan?

DETRICK: Yeah, I mean, the fix, everyone. Everyone’s bullish, right? Everyone feels pretty good. I mean that right there, everyone’s on one side of the boat. Maybe you could get something there, but I’ll tell you what, Charles, you’re the middle. First part of November is usually strong. The last part of November is really strong. November is the best month of the year. You know the troublesome area, it’s right in the middle. So we’re in that area, but also at the same time, small caps, industrials, materials, you know what they’ve done the last eight months? Like nothing. They went sideways from April until just recently went up a Todd’s being passed around and it’s the lifeblood of a bull market. Different areas are taking leadership. Small caps and close to us still look really good here.

PAYNE: Scott, as a professional, you know, buying and selling the market. How do you grapple when you’re buying at a market that’s already at record levels? This is a common question that I get, and when people see me in the street and I like to get, you know, different ideas, how do you do it? How do you say, OK, we’re at all time highs? It feels like it’s Topsy, but I still see value.

MARTIN: Yeah, you got to find the grenades out there, Charles, I mean, you got to find things that basically the market is leaving behind. I mean, a couple of names that come to mind recently, Disney. How about that name recently? Very much left behind in this rally, Peloton and PayPal or two other names that we’ve actually started to add to in this pullback? Tesla even pulled back some when Elon Musk sold that big share that he had there the other day that he put on Twitter. So the reality is that the market is going to go up. We do agree with that, but the names within the market that are going to be left behind are ones that need to pick up because that’s where the value lies. I don’t like to chase big, high flying names that everybody’s talking about, like Ryan mentioned these days, because those are names get, get, get, get really crowded. And when they start to pull back the weak hands get out. But if you start picking off names that have already sold off have already got the sellers exhausted. Those are names you have to go after in a raging bull market like we have today.

PAYNE: Yeah, full disclosure, I’m I’m counting a table on PayPal among some of those names that you just mentioned. All right, so Ryan, great here this year, monster a year, almost in the books. Take us to twenty twenty two. What’s what’s your crystal ball saying?

DETRICK: Yeah, we still think it’s a bull market, but let’s take a look. You know, a couple of years ago, getting 30 percent last year gained 16 percent on the S&P this year. Twenty five percent. We think it’s going to be quite that good. But Charles, I’ll leave you with this. The last 11 times, the S&P 500 gained at least 20 percent for the year, so probably going to be in that situation this year. The next year was higher 10 out of 11 times, up 14 percent on average. So, hey, maybe we’re all getting 30 percent. But I’ll tell you what, Charles, things still look good and history would say the bull market still here.

PAYNE: Sprint, it was Springfield, huh? I just think the other thing you two guys is the most famous person from Springfield.

DETRICK: John Legend

MARTIN: Pitcher for the Cincinnati Reds.

PAYNE: All right. John Legend Dave Birbhum, Yeah, they’re up there. All right. They’re not on the same level as you two guys, but they’re getting there. I’ll tell you a shout out to Springfield. Shout out to two of the best Scott and Ryan. Have a great weekend, guys. Great talking to you.

5:24

CIO Scott Martin Interviewed on Fox News 11.10.21 Pt. 2

Kingsview CIO Scott Martin discusses the Strategic Petroleum Reserve, inflation and what we might expect at the pump.

Program: Cavuto Coast to Coast
Date: 11/10/2021
Station: Fox Business News
Time: 12:00PM

NEIL CAVUTO: All right, let’s get to read on all this from Scott Martin. Scott, I’m just wondering, let’s say the administration goes through with plans to tap the Strategic Petroleum Reserve is a lot of at least 11 Democratic senators have urged without looking at increasing oil production in this country. Isn’t that like a Band-Aid approach? In the meantime, yeah.

SCOTT MARTIN: Just what I was thinking, Neal. A temporary fix to a long term problem is you and Dan just talked about. I mean, sure, you can tap the SPR and maybe alleviate some of the price pressures that we’re seeing in the holidays. But come January, February, March and beyond, you’re going to see the administration’s attack on fossil fuels, especially oil. So you’re going to still have price problems next year. And you’re right about just the process by which the administration has attacked the pipelines and just driven up price. And we’re starting to see that now come through.

CAVUTO: Let’s talk a little bit about the general inflationary picture oil coming a little bit down today. It’s still eye-popping at more than 82 bucks a barrel gas, now increasingly costing over $4 in some locations over $5 a gallon. How long do you see all of this dragging on

MARTIN: A long time? Because demand is there now, see, that’s the problem. Not only have we had obviously reasons that we mentioned just a second ago about price pressures to the upside, but now we’ve got demand really coming in with the economy fully reopening. So I see Neal some real issues at the pump and some real issues with respect to prices of oil prices at the barrel because you have demand coming back where that’s going to drive up price, even if we do to tap the SPR or actually increase production, which is probably unlikely anyway.

CAVUTO: You know, Scott, I notice in the latest quarter, you know, consumer spending was running at about a one point six percent clip that is down from more than 12 percent in the prior quarter. So it’s very clear that Americans are slowing down a little bit. When does slowing down become nothing? I mean, with no change reversing,

MARTIN: It could be soon. I mean, you see these price pressures with the energy side of things, you see some of the other pressures that we’re seeing at the grocery store. Obviously, consumers are feeling the pinch here, so it definitely could turn into something maybe a little bit more of some sort of malaise, especially with now the Federal Reserve question marks going on with Jay Powell and whether he gets renominated or not, Neil. So therefore, you’ve got some pressures on the consumer now that weren’t there, as you mentioned just even six months ago.

CAVUTO: All right, Scott, be talking to you in a bit. Thank you, my friend.

2:25

CIO Scott Martin Interviewed on Fox News 11.10.21

Kingsview CIO Scott Martin discusses buying opportunities, volatile stocks and the electric vehicle space.

Program: Cavuto Coast to Coast
Date: 11/10/2021
Station: Fox Business News
Time: 12:00PM

NEIL CAVUTO: All right, at such a loss for the Dow here, we’re still waiting, by the way, on really in the electric vehicle maker backed by the likes of Amazon and Ford. This one has been a fascinating story to follow because it was originally going to be priced in the 72 to 74 bucks a share level that was essentially doubled from the early talk. And then now they’re saying, you know what? It does debut maybe a hundred fourteen or fifteen dollars a share. So this thing’s like a rocket here, although we be watching it closely. But again, still waiting for that debut, a good opportunity to talk to Scott Martin back with us right now. Kingsview Asset Management. You know, it’s got the right IPO at the right time can tell a lot about what clicks with investors too early to say, whether that you know this electric vehicle maker will be right. But it does seem to get the advanced positive buzz. How do guys like you decide where attention is warranted and where maybe standing back is just as well?

SCOTT MARTIN: Yeah, I think get a look at the space first and foremost, Neil. As far as where some of these companies are located, you mentioned that this happens to be in the electric vehicle space, which is very hot. Obviously, the price is being chased up as we speak. So that’s an area where I think you’ve got to start with respect to where the company is operating. And then secondarily, look at the pricing. As you mentioned, it’s already called up another 30 points above the initial IPO price. Usually don’t chase things like that, but companies that actually come in say around the appropriate IPO valuation, those are companies that we like to buy into because usually the chasing starts happening after they start publicly trading.

CAVUTO: You know, a lot of people get into ideas of all sorts here, and that does seem like you just stated to be a fairly, you know, reliable rule of thumb that the faster you come out the gate, sometimes the more problematic, the longer term. Conversely, you know, sometimes when you stumble, coming out of the former Facebook comes to mind. It took, you know, almost a year before things stabilize and then it was off to the races. All these controversies notwithstanding. Do you play these at all or do you just hold off until the dust settles?

MARTIN: We do play them. You mentioned Facebook. What a great buying opportunity that was felt by about 50 percent. And then those who were lucky enough to scoop it in the high 20s did very well. Bumble is a recent one that did that as well, Neil. And then, of course, Airbnb as well, and DoorDash too. So we do play in that space. But as you mentioned, I mean, some of these things come hot right out of the gate, and they’re just not good stocks to chase. But as long as they come back with some relative valuation, as you mentioned with the latest IPO that we talked about just a second ago, I mean, they’re losing money hand over fist every quarter. So we don’t chase ones that aren’t as fundamentally strong. But there are companies out there coming public that are attractive.

CAVUTO: You know, that’s to Tesla for a second electric vehicle players. But you know, the stock lost about $2 billion in market value over the last couple of days. And now it’s up about it looks like at about 40 bucks or so, it’s around one thousand sixty four a share. But what’s interesting is it all started with Elon Musk, you know, putting out the Twitter this poll to say, I think I should sell some stock up to 21 billion. He lost more than 50 billion on paper in the interim. But it does remind you how dependent that that stock is, you know, joined at the hip to its owner.

MARTIN: Yeah, I mean, he is a rock star, and so what he does affects all aspects of the company and certainly the stock price. It’s kind of funny how he did take the the poll or the opinion of Twitter. It end up costing him more than he actually sold. But the reality is that stock’s volatile and it’s at some near all time highs, and therefore it’s going to move around quite a bit. But that space, the electric vehicle space is so hot that that company is going to do very well, especially with a lot of the cars that they have coming down the line.

CAVUTO: Thank you, my friend. Scott Martin. Following all of these developments.

3:41