Weekly Commentary

Good economic news—namely a better-than-expected jobs report—was bad news for the bulls this week, as the S&P 500’s nine-week winning streak has come to an abrupt end.  The sanguine employment figures have caused a re-rating in tech stocks, as well as interest rates.  To say the least, a rate hike by the new Warsh Fed is basically a resounding no, given lurking inflation and a strong underlying economy.  However, we continue to see a strong case for “buying the dips”, as any economic deterioration (given the current strength of the US economy) would likely reverse the Fed’s hawkish bias.

Another obvious newsworthy event is likely to occur next week with the blockbuster IPO of SpaceX, which will likely transform into an all-in Elon Musk bet (including X (ex-Twitter, Starlink, Xai, among others).  The IPO is likely to be oversubscribed, so we expect a very volatile environment for the stock once it hits the secondary market.  We remind our readers that many times there is a difference between a good stock and a good company, and SpaceX could be one of those examples—a good stock but not necessarily a good company.  At any rate, it will be interesting to see how early trading evolves.

In terms of fixed income, we continue to see the belly of the yield curve as the most problematic, especially given the Fed’s hawkish stance.  We also see credit as a place to proceed with caution, given tight spreads but also base interest rate volatility.  Precious metals have also exhibited bouts of volatility, and while we remain constructive on gold, we also recognize that current conditions do not warrant rebalancing in the asset class, at least for the time being.

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