Wednesday was a humdrum day in the financial punditry world, where a choppy market means they just throw out every buzzword and the kitchen sink to see what sticks.
The first sign is when several themes will be at odds with one another… On CNBC’s front page, bearish titles around the omicron variant and gold sat right next to bullish ones on job quits data and dividend stocks.
Source: CNBC
But as usual, there’s a leading indicator hitting the tape that tells us where we are in the business cycle… One we can use to reorient our Fortune Research weekly watchlist.
And while Tuesday’s indicator was clearly the disinflationary move in ISM prices paid — as we noted — Wednesday’s key data point isn’t the 807,000 jobs we added…
It’s the slowing auto sales number.
Source: Bloomberg
Few people recognize that auto sales are a leading indicator for the broader economy. When people get new jobs, a car is one of the first big-ticket items they aim for.
And with sales still sitting near recent lows as both production and inventories remain slim, the writing may be on the wall for the second and third quarters of this year.
Source: Bloomberg
A Shift in the Fortune Research Weekly Watchlist for Jan. 5, 2022
Not too many asset classes work consistently in that environment, but last week we laid out a bunch for you in our “defense-oriented” watchlist.
There’s only one change to that this week, with Barclays iPath Series B S&P 500 VIX Short-Term Futures ETN (BARS: VXX) out and large-cap Industrials — represented by the Industrials Select SPDR Fund (NYSEArca: XLI) — back in…
Updated values for your Fortune Research Weekly Watchlist below.
Source: Bloomberg
But we also told you last week which one we thought would be strongest, and that was Real Estate.
Here we are just a few days later, with the Real Estate Select Sector SPDR Fund (NYSEArca: XLRE) down big on a choppy day as the risk-on trade resumes.
That’s our FREE TRADE for the week, as real estate stocks haven’t disinflated much at all, and likely won’t through the balance of summer.
There’s just too much momentum left over from the massive bull run in prices from 2020 to present.
We’re also buyers of China — the KraneShares Bosera MSCI China A Share ETF (NYSEArca: KBA) — on weakness here, and would think about shorting oil at current levels… though we aren’t pulling the trigger yet on, either.
I’ll try to unpack some more of what I’m seeing Thursday, so stay tuned.
All the best,
Matt Warder
Fortune Research
