This is the first Global Week Ahead centered in the month of December.
Festive “risk-on” cheer came early to world markets (sans U.S. dollar bulls) on growing certainty that central banks will start slashing their short-term policy rates next year. Down in Australia on Tuesday, their central bank may reinforce a view, that policy rates have peaked. On Friday, the key November U.S. nonfarm jobs data will test this “risk-on” exuberance. Next are Reuters five world market themes, reordered for equity traders— (1) Has a year-end Santa Claus stock and bond market rally already happened? Christmas has come early with global stocks posting their best monthly performance in three years in November and global investment-grade bonds returning almost +4% — the best month on record going back to 1997. Now, the early Santa rally risks running into a central bank Grinch. Markets price rate cuts as early as the first half of 2024. The U.S. Federal Reserve and the European Central Bank, wary of market euphoria loosening financial conditions, may start to push back. Whether equities and bonds can rise in tandem next year also feels doubtful. Stocks price in a benign economic scenario of lower borrowing costs and steady growth Government bonds, which shine in recessions, have been boosted by signs that the impact of previous rate rises is starting to cause pain Both cannot be right. (2) Emerging Market (EM) stock and bond markets rang up the early returns, too. Emerging market investing sometimes gets likened to riding a tiger — a lot of fun while you are on it but the dismount can be deadly. November has certainly been the enjoyable part. EM stocks are up +7.5% for their best month since January Bonds in both local currencies and dollars have made +6%, while A +10% rebound by Israel's shekel, and +5% to +6% rises from central European currencies have hoisted MSCI's EM FX index to its highest since April 2022 Decembers have been generally kind, too. That FX index has risen every December since a dip in 2015, and stocks have made decent gains in three out of the last four. It will depend on where bond yields and risk premia, or ‘spreads,' go from here of course, but many of the big investment houses are again sounding hopeful. (3) On Friday, traders inspect the November U.S. Federal nonfarm jobs report. Will Goldilocks stick around? That's the question investors are pondering as they await the Dec. 8th U.S. jobs report after a rebound that has taken the S&P500 within spitting distance of a fresh year high. The data will have to walk a fine line to satisfy the so-called Goldilocks narrative of cooling inflation and resilient growth that has boosted asset prices. Too strong a number would undercut bets that the Fed will begin easing monetary policy sooner than expected, presenting an obstacle to the searing fourth quarter rally in stocks and bonds. A weak number, on the other hand, could spark fears that the economy is beginning to roll over following 525 basis points of rate increases, potentially dulling risk appetite. Economists polled by Reuters expect the U.S. economy to have added +175K jobs in November, versus +150K in October. (4) On Tuesday, the Reserve Bank of Australia (RBA) steps to the policy plate. Cooler than expected consumer inflation has sounded the death knell for any expectations the Reserve Bank of Australia will hike rates on Tuesday. But investors are wary of a hawkish hold, with prices still elevated and new Governor Michele Bullock increasingly seen as more of a hawk than her predecessor. Traders currently put odds for a hike at the following meeting in February at about 1-in-3. Some hint of how soon the Bank of Japan can begin its own, much-delayed tightening campaign may come from the Tokyo CPI data, also on Tuesday. Whether business and the economy could even weather a return of higher interest rates will also be clearer from the Tankan corporate sentiment surveys and GDP data on Wednesday and Friday. (5) European Union (EU) member states face internal political turmoil. First political turmoil in Spain and Portugal and now upheaval in Germany and the Netherlands heralds fresh uncertainty ahead of a jam-packed 2024 election year. After November's constitutional court blow, Germany faces a 17 billion-euro ($18.54 billion) hole in next year's budget. No date has been set for the budget, so news from Berlin remains in focus and a fiscal correction means the economy is at risk of shrinking for a second-straight year. And coalition talks are stumbling in the Netherlands after far-right, anti-EU Geert Wilders' shock election win. Turmoil in two E.U. heavyweights is unwelcome just as the bloc seeks more cash from members, and finance ministers meet to iron out new fiscal rules on Friday. Bond vigilantes are watching for a deal giving leeway for public investments while taking debt sustainability seriously. All this as the first E.U.-China summit in four years on Dec. 7th to 8th looms. Zacks #1 Rank (STRONG BUY) Stocks Let’s look into the share dynamics of three upgraded large cap Info Tech stocks. (1) Palantir Technologies (This is a $20 stock with a market cap of $43.2B in the Technology Services space. I see a Zacks Value score of F, a Zacks Growth score of A and a Zacks Momentum score of B. PLTR Quick Quote PLTR - Free Report) : Image Source: Zacks Investment Research
Palantir Technologies Inc. builds and deploys software platforms for the intelligence community principally in the United States.
Their website leads with “Powering AI-assisted decision making — from war zones to factory floors.” “We build category-leading software that empowers organizations to create and govern artificial intelligence — across public and private networks.” Palantir Technologies Inc. is based in Denver, Colorado. (2) Pinterest (This is a $34 stock with a market cap of $22.4B in the Internet Software space. I see a Zacks Value score of F, a Zacks Growth score of A and a Zacks Momentum score of D. PINS Quick Quote PINS - Free Report) : Image Source: Zacks Investment Research
Pinterest was incorporated in Delaware in 2008 and is headquartered in San Francisco, CA.
The company provides a platform to show its users (called Pinners) visual recommendations (called Pins) based on their personal taste and interests Users then save and organize these recommendations into collections (called Boards) Pinterest generates revenues by delivering ads on its website and mobile application. The company is helping advertisers reach millennials and Gen Z audience who are more active on immersive mobile platforms. Advertisers purchase ads directly or through their relationships with advertising agencies. The company recognizes revenues only after transferring control of promised goods or services to customers. This happens when a user clicks on an ad contracted on a cost per click (CPC) basis, views an ad contracted on a cost per thousand impressions (CPM) basis or views a video ad contracted on a cost per view (CPV) basis. In the third quarter of 2023, Pinterest reported revenues of $763.2 million. The company serves ads in around 34 countries and the average revenue per user in the United States and Canada came in at $6.46 as of Sep 30, 2023. Pinterest uses metrics like monthly active users (MAUs) to measure its user base. At the end of third-quarter 2023, Global MAUs were 482 million. Pinterest faces significant competition from the likes of Amazon, Facebook (including Instagram), Google, Snap and Twitter and smaller companies including Allrecipes, Houzz and Tastemade. (3) Vertiv (This is a $44 stock with a market cap of $16.1B in the IT Services space. I see a Zacks Value score of D, a Zacks Growth score of A and a Zacks Momentum score of C. VRT Quick Quote VRT - Free Report) : Image Source: Zacks Investment Research
Vertiv Holdings Company provides digital infrastructure and continuity solutions. It offers hardware, software, analytics and ongoing services.
Their website reads “Future-ready Technology from Edge to Cloud.” It then shows their physical products offering: liquid cooling options for data centers micro data center & edge white space complete power management thermal management, and prefabricated modular solutions And the continuity services needed to keep all of this equipment running. Vertiv Holdings Company, formerly known as GS Acquisition Holdings Corp., is headquartered in Columbus, Ohio. The thread seen across the three Zacks #1 Rank Info Tech stocks I showed you? Their poor (D or F) Zacks Value scores come from chasing a strong Zacks A Growth rating. Key Global Macro The major print this week is Friday’s November U.S. nonfarm payroll report. On Monday, the Tokyo CPI ex-Food and Energy for November comes out. I see a +3.8% y/y prior print. The Tokyo broad CPI was at +3.3%. On Tuesday, we get the Reserve Bank of Australia (RBA) policy rate statement. The prior policy rate is 4.35%. The U.S. ISM services index for November comes out. I see a prior 50.8 and a consensus for another 50.8. U.S. JOLTS job opening data comes out for October too. 9.55M is the prior print. There are still a lot of job openings supporting consumer spending this holiday shopping season. On Wednesday, U.S. ADP private payroll additions come out for November. I see +113K posted in October. Euro Area retail sales for October come out. I see a -2.9% y/y prior print. A negative trend! On Thursday, Mainland China’s exports and imports for November come out. I see a USD -6.4% y/y prior print for the exports, and a +3.0% prior print for the imports. On Friday, U.S. nonfarm payrolls for November come out. I see a consensus for +175K, after an October +150K. The U.S. household unemployment rate should hold up at 3.9%. Conclusion This week I note a positive consensus ahead of the coming U.S. nonfarm payroll report. In turn, I note the negative Euro Area retail sales trend, and highlight weak Mainland China trade data. The global state of affairs seems to show us a strong U.S. economy, riding along with static Euro Area and Mainland China counterparts. How these geopolitical and policy times change those circumstances? We shall see. Happy trading and investing in December!
That’s it for me.
Warm Regards, John Blank Zacks Chief Equity Strategist and Economist