Friday Haymaker - Chartbook Edition
A broad, insight-packed presentation of high-finance, economic, and industry/stock charts from the Haymaker and his top-notch external resources.
“The advocates of public control cannot do without inflation. They need it in order to finance their policy of reckless spending and of lavishly subsidizing and bribing voters.” -Ludwig von Mises, 1912 (quote courtesy of Danielle DiMartino Booth)
Market lore has it that January sets the tone for the full year. If this month continues to be soft, that doesn’t bode well for much besides Japanese stocks and the beaten-down oil market. However, two weeks is a long time in the stock market and a lot can change between now and month’s end. Lending credence to this theory, since 1950 up, Januarys have led to positive full year returns 85% of the time. Skeptics point out that the market rises in 7 out of 10 years, rendering the January Indicator a bit less impressive.
Even though the Japanese stock market has been outperforming the S&P since the start of 2022, at least in yen terms (its weakness versus the dollar has masked that for U.S. investors), there are solid reasons to believe the rally will continue. Per the table below, it’s clear that the 30-year bear market in the Nikkei created an exceptionally undervalued condition. Japanese household allocations to equities are particularly noteworthy, particularly because they have massive cash holdings.
Initial claims for unemployment have been trending down in recent weeks. That’s a definite positive for the economy. However, the trend in business bankruptcy filings calls into question the accuracy of the initial claims data. It could be a function of “labor hoarding” after the severe challenges of hiring and retaining employees in the wake of the pandemic. This may be why hours worked have been coming down and continuing claims for unemployment insurance are still rising. Moreover, despite nearly universal soft-landing expectations, U.S. bankruptcy filings hit 642 last year, per S&P. This is the most elevated since 2010 when the economy was haltingly emerging from the Great Recession.
