Market Research Reports 9-27    
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Good morning,

I hope you enjoyed your weekend. Sorry for the delay this morning, I
have Covid and recovering thanks to the brave doctors at Front Line
[[link removed]].

Below is a small excerpt from the _ABS ADVISOR MARKET INTELLIGENCE
REPORT_ [[link removed]]. It is published every
Monday morning to help conservative financial advisors and investors
save time and outperform. We hope you enjoy it, and please feel free
to forward it to your friends. 

KEY MARKET TRENDS

_Tip: Use this as a quick guide on the short-term direction of key
markets. I once had a client that would call me nearly every day
asking the direction of the markets. This is a quick cheat sheet to
know the trend and help understand what is happening with the markets
in the short term._

__

KEY DRIVERS FOR THE WEEK OF SEPT. 27, 2021

_TIP – This is a 1-minute brief bullet-point summary. It is a tool
that gives investors and financial a fast and simple list of what to
watch for and talking points for the week._

* Hawkish pivots from central banks drives bond yields sharply higher
* FOMC stated QE tapering could begin soon, end in mid 2022; 10-year
rate 1.45%
* U.S. data includes ISM, durables, income, consumption, and
confidence on tap 
* Treasury auctions $183 bln in coupons: $60 bln 2s, $61 bln 5s, $62
bln 7s
* Bevy of Fedspeakers should voice support for likely QE tapering
“soon” 
* U.S. fiscal policy complicates with possible government shutdown
* Canada GDP expected to show further erosion in growth; holiday
Thursday
* Japan services PPI, production, retail sales, unemployment, housing
starts
* China PMIs should reflect slowing; Bank of Thailand seen on hold
* German elections may not yield clear winner for Chancellor Monday
* Eurozone CPI, ESI economic confidence, PMI, unemployment   
* German data on HICP, jobless numbers, retail sales
* UK Q2 GDP expected solid, CIPS manufacturing PMI due

STOCKS & ETF WATCH LIST (PAID SUBSCRIBERS)

Tip: Use this section to find stocks and ETFs to add value to your
portfolio by increasing the alpha (return) and decreasing beta (beta).
Our list is updated monthly to help provide our readers with timely
insights. Readers should do their own research before making any
investment. In order to make our report easier to read, we are now
including the stocks as lists for readers in separate posts.

* INFLATION STOCK PICKS: List of stocks that we think should perform
better in a rising inflation environment. Click here
[[link removed]]
* AUTO PARTS STOCK PICKS: Auto parts companies are likely to see
their stocks rise as the average age of cars and light trucks
increased from 11.9 years in January 2017 to 12.2 years in January
2021, according to new data from IHS Markit. Below are the top auto
parts companies that investors should buy now before the profits roll
in. Click here.
[[link removed]]
* SOLID PICKS: This group of stock/ETF picks is likely to experience
growth and perform well into the near future. Click here
[[link removed]].
* DIVIDEND STOCKS: List of stocks that have excellent dividends and
business performance. Click here.
[[link removed]]
* DIVIDEND GROWTH STOCKS: List of stocks that have a history of
growing dividends. Click here
[[link removed]].
* DIVIDEND ETFS PICKS: This list of ETFs is selected for their
ability to pay dividends. Click here.
[[link removed]]
* DOGS OF THE DOW: This list of DOW stocks based on H. G.
Schneider’s Article in the Journal of Finance in 1951 that used the
price-earnings ratio. The general idea is that blue-chip companies
that pay a dividend are more likely to withstand an economic downturn.
Click here. [[link removed]]

WEEK AHEAD: BONDS BEARS & BIDEN TEST

NORTH AMERICA

CONGRESS & DEBT CEILING

THE BIG MOVER THIS WEEK IS CONGRESS AS IT TRIES TO PASS THREE KEY
BILLS (INFRASTRUCTURE, SOCIAL/GREEN BILL, AND DEBT CEILING). Fiscal
2021 ends on September 30 and without legislation to extend or suspend
the debt limit, the government faces a shutdown. As usual, the
necessary legislation is being used as a political football, with the
deep divide between the Democrats and Republicans making for a
particularly difficult scenario this time around. Something will
eventually be passed but at what cost. Here is what is being debated.

THE INFRASTRUCTURE BILL: This bill is about $1 trillion and passed in
the US Senate with bipartisan support. The current state of the bill
is unacceptable to most Democrats in the US House because it doesn’t
include their political projects such as “clean energy, social
justice, etc.”

THE SOCIAL AND ENVIRONMENT SPENDING BILL: This $3.5 trillion is the
House Democrats’ response to the slimmed-down “INFRASTRUCTURE
BILL.” It has chuck full of political agendas, taxes, and a new
“green energy plan.”

DEBT CEILING: According to our watches, Congress has until Thursday
to pass a bill to raise the debt ceiling. If they fail to do so, then
we could see a shutdown of the government.

LEGISLATIVE BATTLEGROUND: House Democrats and Biden want to pass the
increased $3.5 trillion spending bill without Republican support
through budget reconciliation. However, they need Sen. Joe Manchin and
other moderate Democrats’ support. Manchin has stated publicly he
won’t support the bill. Failure to pass the bills will reflect on
Biden who has increasingly looked weaker with his failure at
Afghanistan and the Border.

SCENARIO 1: I think it is highly likely the Democrats in the House
will pass the increased spending bills (at a slightly lower level) and
debt ceiling limit bill in order to put extreme pressure on moderate
Democrat Senators and Republicans. This will go over like “a fart in
church” and cause a shutdown or serious shutdown scare as all bills
fail to pass. The market will likely drop 3-10%, but could partially
recover if the debt ceiling bill is passed in order for Congress to
debate more. The key thing to know is that the Democrats and Biden are
using the debt ceiling limit to create a sense of urgency to pass
their spending bills. They will not want to give this away and will
signal defeat for them. However, they don’t want to be blamed for a
government shutdown.

SCENARIO 2: House Democrats pass the debt ceiling bill,
infrastructure bill, and a much lower spending bill (say $1 trillion
vs. $3.5) that Democrat Senators can support. I think this is the best
strategy for Democrats as it allows a much-needed win for both them
and Biden while avoiding a government shutdown. However, I am unsure
that Pelosi has the support for this and it is unknown how moderate
Democrat Senators will react to it. The market will likely not respond
or be positive as it will signal “business as usual.”

SCENARIO 3: House Democrats fail to pass any bills and we have a
government shutdown. Expect a full blame game between the Democrats,
Republicans, and Biden. The market will likely drop 3-10% and will not
come back until the shutdown is over.

BACK TO THE MARKETS

It is a busy U.S. calendar this week with a number of important
indicators. None will have much market impact individually, but all
will contribute to the Fed’s overall policy calculus where many on
the FOMC now believe the “substantial further progress” conditions
for QE tapering have been met. Chair Powell has been more cautious
given his concerns over the “substantial slack” in the job market.
But he too is leaning toward scaling back asset purchases this year.

The condition for the labor market is “all but met” on a
cumulative basis he noted last week. Hence, it won’t take much
improvement in the job numbers to satisfy him and get his vote on
tapering. We suspect that announcement comes in November.

While ISM, durables, income, consumption, and confidence will be
monitored, fiscal policy will distract with the debt limit and a
possible government shutdown looming at fiscal year-end (September
30), while negotiations on the big spending and tax bills are on tap
as well.

The Treasury’s $183 bln in 2-, 5-, and 7-year auctions will also be
interesting in this environment with a more hawkish Fed, a QE tapering
on the way, and still hot inflation. There is a bevy of Fedspeak and
we expect they will voice their support for a taper announcement later
this year.

The September ISM (Friday) highlights as it includes timely
information on manufacturing employment, production, inventories, and
prices. We expect the index to dip back -0.4 ticks to the 59.5 level
from July, versus the 59.9 in August. The slippage from the 18-year
high of 647 in March largely reflects the negative impacts from
materials and labor shortages and other supply constraints, rising
prices, the spike in the Delta variant, and the waning impact of
stimulus checks. All of the sentiment indicators have dropped on net
through July-August from prior peaks, and we expect further declines
into late-2021 toward more historically typical levels.

Other reports this week include August Advance durable orders where we
forecast a 0.5% increase after dipping -0.1% in July. Support should
come from a 0.5% bounce in transportation orders. September consumer
confidence is expected to rise to 115.0 after a drop to 113.8 in
August. A 0.2% gain in personal income is forecast for August, with
spending rising 0.6%. Q2 Q2 GDP should be revised up to a 7.0% pace of
growth, though the more relevant Q3 pace is now projected slowing to a
5.4% clip.

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OUTPERFORM THROUGH UNBIASED PROFESSIONAL MARKET RESEARCH. 

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THE _ADVISOR MARKET INTELLIGENCE REPORT _INCLUDES:

* KEY MARKET DRIVERS – Know what is directly affecting the
markets.
* INDEX & SECTOR TRENDS – Determine which sectors or areas are
trending up or down.
* GLOBAL MARKET ANALYSIS – Get a high-level picture of the US and
global economy.
* STOCKS TO WATCH – High-quality blue-chip and dividend income
stocks to watch.
* ECONOMIC CALENDAR – Find out what is happening this week.
* SPECIAL REPORTS – Get critical insider insight on key market
movers such as inflation, tax bills, and unique events.

[[link removed]]

 

Sincerely,

Irving Wilkinson

Editor

AlphaBetaStock.com [[link removed]]

 

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