Trouble for stocks Watch out for stock headwinds and recessionary pressures, warns bond king Jeffrey Gundlach

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Are the stocks set to break through from that rocky start to 2022?

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s&p 500 spx,
+0.92%
A five-session losing streak broke on Tuesday after Federal Reserve Chairman Jerome Powell vowed the central bank would use its “tools” to bring inflation under control without hurting the economy. And equity futures are on the rise, despite some big figures showing the fastest annual increase in consumer prices since 1982.

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Some say that a rebound with teeth just may not happen here. “Bounces from oversold levels are hard and fast, and yesterday’s 150-point intraday reversal certainly counts as hard and fast,” said Jani Zidins, crackedmarket blog, “That said, more often than not, the third surge is the real deal, which means we may see some testing of the lows before it’s all said and done.”

cracked market

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on us call of the day From Jeffrey Gundlach, CEO of the so-called Bond king DoubleLine, who just unveiled his predictions for the coming year. And he sees unfavorable conditions for a stock market that has been “backed by QE”. [quantitative easing]And now facing the Fed tapering off, Powell seems “more aggressive” every time he speaks.

“Today [Tuesday] It seems that Jay Powell is repeating the 2018 formula: end QE and raise official short-term interest rates. Gundlach said In a webcast to subscribers, which was tweeted live late Tuesday. He said he is “not predicting a recession yet”, but sees those pressures building up.

He said the yield curve had seen “quite a powerful flattening” and was “approaching the point where it indicates economic weakening. At this stage, the yield curve is no longer sending a ‘don’t worry be happy’ signal.” It is sending an ‘attention’ signal, he said.

Gundlach highlighted a chart that showed consumer sentiment to be “free-falling,” which “looks somewhat bearish.” He said One reason car prices have gone up may be because prices have gone up so much that “people don’t think it’s a good time to buy a car if they get one.” The jump in prices has also made it possible to make money from flipping and selling, he said.

Fund manager and ARK Invest chief executive Cathy Wood has warned of a “bloodbath” in the used and new car markets.

The money manager said the housing market is buoyed by low supply and should remain supported provided mortgage rates are low. He is neutral on gold and sees the dollar weakening.

US stocks are costlier than most everywhere else, Gundlach said, as he pointed out that European markets, his favorite in 2021, were looking good again for 2022.

looking back Gundlach’s 2021 ForecastIn this article, the manager recommends a “winning” formula of half cash and Treasury bonds, 25% in equities, mostly emerging markets and Asia, and 25% in real assets such as gold or assets, to hedge against high inflation. He expected US equities to lag behind the rest of the world, along with rising inflation and volatility.

iShares MSCI Emerging Markets ETF EEM,
+2.31%
Losses 5% in 2021, compared to a rally of 27% for the SPDR S&P 500 ETF Trust SPY,
+0.91%,
A popular exchange-traded fund that tracks indexes. Real estate actually proved to be a sensible investment destination, although gold fell 3% in 2021, and Treasury bonds had a disappointing year.

buzz

In addition to December consumer prices — expected to rise 7% on an annualized basis and 0.5% on the month — the federal budget and the Fed’s beige book are due later.

The European Medicines Agency has warned that too many COVID-19 boosters could damage the immune system, echoing comments from the World Health Organization. Meanwhile, the Omicron coronavirus pandemic may be peaking in the UK, offering hope for the US and elsewhere. And the White House is getting ready to send millions of COVID-19 tests to public schools.

Biogen BIIB,
+2.64%
Shares are down 9% on news Medicare will limit coverage of the biotech’s controversial and expensive Alzheimer’s drug EduHelm and others like it in the future.

Shares of Immuron IMRN,
+2.67%
are on the rise, after the Australia-based biopharmaceutical company received $4.5 million from the US Department of Defense to evaluate a key drug for military use.

A 19-year-old German teenager said that he managed to hack 13 Tesla TSLA,
+0.59%
autos around the world through a software flaw that lets him start cars, unlock doors and windows, and disable security systems.

And a reminder that Friday will mark the start of earnings season with banks — including Citigroup C,
+1.64%,
JPMorgan JPM,
+0.10%,
Wells Fargo WFC,
+1.28%
and BlackRock BLK,
+1.70%
– Reasons to report (See preview.)

Market

invalid

stock futures ES00,
+0.13%

YM00,
+0.11%
are up, led by the Nasdaq-100 NQ00,
+0.24%
Bond yields have remained stable along with the dollar. oil prices CL00,
+0.43%
are rising, with natural gas futures NG00,
+2.80%
Up about 3%.

Chart

Where does an increase in real return begin to hurt stock investors? A team of UBS strategists led by Bhanu Baweja said that when yields increase by more than 40 basis points in three months, “the impact on the market becomes material and non-linear.”

“This is the range of what we see as the rough limit of the actual rate of pain”
for the market. from here causes a 10bp increase in the actual yield
Markets down about 0.8%, ceteris paribus. but what if the other
Aren’t things the same? 5.2-point increase in PMI will negate the hit
Market by 50bp increase in actual yields,” the strategists said in a note to clients.

top ticker

Here are the most active stock-market tickers on Businesshala, as of 6am

anchor

security name

TSLA,
+0.59%

Tesla

GME,
-0.65%

GameStop

AMC,
+0.04%

AMC Entertainment

NIO,
+3.84%

NIO

AAPL,
+1.68%

Apple

Dad,
+3.03%

Alibaba

NVDA,
+1.52%

NVIDIA

lcd,
+8.99%

lucid

NVX,
-3.19%

novavax

Information,
+1.01%

Infosys

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