Monday Takeaways: Stay Long, My Friends

Shah Gilani|October 14, 2024

Stay long, my friends.

That’s the message of the markets right now.

It’s a stubborn message… because there are a few warnings signs ahead.

But with some major earnings reports out this week… the bulls will stay in charge.

See what’s going on in your Monday Takeaways, your inside track on what’s moving your money… NOW.

Click on the thumbnail below to watch.

Transcript

Hey, everybody. Shah Gilani here with your Monday Takeaways.

It’s a little chilly this morning. I have the doors, windows open, enjoying the briskness. Got my F1 hat on from a little road rallying this past weekend.

Speaking of rallying, the takeaway from last week is markets want to go up.

The week started slowly with a lot of fears about Milton and the damage it would cause and the issues with insurers. Well, it was bad, people. It was really bad. I have a place in Florida. I have lots of friends in Florida and family. It was bad. Yes, it wasn’t as bad as it could have been… but trust me, it’s bad.

But when we’re talking about $100 billion versus $200 billion, I guess that’s not so bad.

Markets picked up on that midweek and started rallying.

This is in spite of the fact that the VIX has been north of 20, and the 10-year yield has gone from 3.63% the day before the Fed cut 50 basis points to over 4% last week, and markets rallied.

Bank reporting certainly helped at the end of the week. They were all good. The numbers were great pretty much across the board for the banks. We got some big numbers coming up this week.

Tuesday, we’ve got Bank of America, Citigroup, Goldman Sachs, and Charles Schwab.

On Wednesday, we’ve got Morgan Stanley, US Bancorp, and Discover Financial. And American Express is later in the week.

We’ve got a bunch of financials this week, and markets are going to look to the financials to see how things look in terms of their loan loss provisions, of course, their margins and their net interest margins. And overall, loan growth… or are they reserving more because of credit quality diminishing?

So lot of interesting stuff coming out of the banks. But what happened on Friday was pretty much across the board. I’m going to say good news. So, yes, we had a pretty strong rally.

And the takeaway, again, from last week is that markets want to go up. The markets are going up despite rising interest rates after the Fed has cut (the 10-year yield has risen significantly)… and the VIX very much staying above trend (the mean for the VIX of last 25 years is 19.5), which is indicative of volatility ahead.

Yet markets are still making new highs.

Not all the benchmarks, small caps or Russells, not participating in the same way, but, really, it’s about a lot of big tech moving stuff higher, but not all big tech is participating. That’s another thing that’s getting a little wonky out here.

So when markets want to go up, you stay with the long side. But, increasingly, you have be careful.

The likes of Tesla, Google, the likes of some of these companies that are under pressure are not doing so well. Tesla absolutely got hammered last week and is likely to continue to be under pressure. So that’s going to affect the Magnificent Seven. It’s going to affect some expectations for trends that investors are hoping will be next level, like autonomous driving, like the robo cabs, like a lot of stuff that’s I still think far off.

But markets look like they want to go up. They’ve been going up. The takeaway from that is it’s all good until it isn’t.

It doesn’t mean we’re going to continue to go up. It just means until there’s a reason for stocks to sell off – and there isn’t one on the front burner – we have to continue to play from the long side.

But just be careful out there. That’s your takeaway.

I’ll catch you guys next week.

Cheers.