Federal Reserve “Cancelling” the Santa Claus Rally?

The story of the week, the month, and certain the entirety of subsequent yr, is the Federal Reserve and the remainder of the world’s central banks.

And with good purpose! The Fed’s coverage route is the single most essential factor driving the inventory market proper now.

However it’s not the solely factor…

Two less-than-rosy numbers got here out final week which contributed to the swan dive that closed out the week.

First was retail gross sales on Thursday. U.S. retail gross sales noticed their largest drop in 11 months in November, dropping 0.6% from October. 9 out of 13 classes have been decrease, together with big-ticket gadgets like autos and furnishings — the issues folks have a tendency to purchase on credit score.

One awful month doesn’t make a development. However it does recommend that the Fed’s fee mountaineering is working, as costlier credit score could also be curbing borrowing and spending.

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Supply: US Census Bureau

It additionally suggests that vacation buying this yr is perhaps a flop … as a number of main retailers have been telegraphing for months. “Black Friday” doesn’t actually imply the day after Thanksgiving immediately. It’s a free idea for pre-Christmas gross sales, which now seem to begin properly earlier than Halloween. And taking a look at the information, it seems that the bump in gross sales we would usually anticipate in November got here in October as an alternative.

Peter Lynch, legendary supervisor of the Constancy Magellan fund and considered one of the most profitable inventory pickers in historical past, is known for his recommendation to “spend money on what you realize.”

I’d take {that a} step additional to “spend money on what you see.” In your every day comings and goings, take a look at what persons are truly doing. Are their buying carts full? Do the parking heaps in the mall have extra or fewer vehicles than typical for this time of yr? This may occasionally inform you a large number about what to anticipate as soon as the post-Christmas earnings begin rolling in.

One other factor we’re seeing is a lower-than-expected Buying Managers Index numbers out of the manufacturing and companies sectors…

Each have been anticipated to rebound from December after falling to their lowest ranges since the COVID lockdown panic in November. However they fell extra, towards consensus expectations.

There’s a whole lot of nuance to be present in these experiences, however in abstract, they point out that enterprise situations are worsening as we shut out 2022, and the danger of recession is rising.

All this information comes throughout a seasonally bullish interval for shares … which clearly hasn’t manifested this vacation season.

We’ve been beating the drum in Banyan Edge for the previous two weeks, warning of the potential for a recession and extra market ache forward.

However we’re additionally not recommending you disguise your money in Mason jars buried in the yard. We view any turbulence forward as a main alternative. And talking of that…

A Sneak Peak at This Week’s Insights

The massive theme uniting all our gurus subsequent week is power — with every giving a singular tackle how the new “Tremendous Bull” in power shares will proceed.

Tomorrow, Ian King will take a long-term take a look at the renewable power sector. Renewables, alongside conventional power markets, have seen a giant increase in 2023. And Ian thinks the two rallies, seemingly distinct, are literally closely interlinked…

Charles Mizrahi will do what he does finest on Wednesday and provides his tackle the fundamentals for power shares and notably oil shares over the subsequent 5 years. Charles believes that traders are critically discounting the significance of fossil fuels in the world economic system, and the way lengthy they’ll stay entrenched…

On Thursday, Mike Carr is giving his tackle power inventory valuations. Regardless of the robust outperformance in 2022, many high quality power shares are nonetheless wildly low-cost from a valuation standpoint. When you assume you missed the power inventory rally, don’t miss Mike’s take later this week…

And on Friday, Adam O’Dell will cap off the week with an essential lesson for traders spoiled by the bull market of the 2010s. What labored final time in all probability received’t work this time. When you’ve been eyeing the massive decline in tech shares as a shopping for alternative, do your self a favor and maintain off shopping for till you hear what Adam has to say.

However earlier than we get to any of that…

Don’t Miss The Banyan Edge Podcast

After final week’s inaugural version of The Banyan Edge Podcast, we’re following it up immediately with a deep dive into the Federal Reserve’s sport plan.

I’m sitting down with Adam O’Dell, Mike Carr and Ian King to get their take and to listen to how they plan to navigate their readers via what could possibly be a extremely troublesome stretch.

You received’t need to miss this, as the Fed’s coverage in the subsequent yr is the single most essential variable to the market’s route.

You’ll be able to anticipate that in your inbox at 5 p.m. Japanese immediately, however till then, ship any questions you might have for our consultants to We’ll reply your questions in the podcast’s Q&A bit.

Discuss Quickly,

Charles Sizemore's SignatureCharles SizemoreChief Editor, The Banyan Edge

P.S. In case you missed it…

We’re a couple of week and alter away from Adam O’Dell’s landmark oil presentation to cap off 2022.

He and his workforce have had their head down for weeks researching the finest oil shares to purchase and maintain as we enter an energy-dominant market in 2023 in past.

If you’d like the finest shot at outperforming the market subsequent yr — even probably sidestepping the bear market totally — you’ll make a degree to be there.

Enroll proper right here earlier than house fills up.

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