• Buyers remain patient allowing sellers to come to them.

  • Central banks around the world join in the fun.

  • Investors now having to re-price the risk of rising inflation and the cost of a longer recession.

  • Oil up on Russian and Iranian conflicts on Thursday and Down this morning on the global slowdown narrative. Really?

  • And the MWCB (Market Wide Circuit Breakers) are something we should be thinking about now.

  • Try the Penne Rigate.

And the hits keep coming…..stocks got slammed again yesterday…..as treasury yields continue to move up….and investors continue to digest JJ’s latest statements….all as a parade of global central banks join in the fun and hike rates…..to combat rising inflation in their countries as well as combat the surging dollar….which has now broken above the high created on September 7th…and now trading at 112 – up 17% ytd.

The 2 yr. treasury is now yielding 4.1222% while the 5 yr. is yielding 3.93% and the 10 yr. is now knocking on the door of 3.72%....the highest that has been since 2011 – leaving the yield curve completely inverted now for the 14th week…….and this move continues to put pressure across the broad market but even more pressure on the ‘sexy’ hi-growth names….that all happen to be listed on the Nasdaq....by the end of the day - The Dow ended the day down 110 pts or 0.4%, the S&P lost 32 pts or 0.8%, the Nasdaq fell 150 pts or 1.7%, the Russell lost 40 pts or 2.26% and the Transports gave back 300 pts or 2.3%.

The transports are now well below the July lows…..and are now trading at November 2020 levels…..the Dow industrials are now approaching the lows of June ….in fact are less than 200 pts away from piercing that level….and if Dow theory holds true – the Dow Industrials must follow the Dow transports to confirm the trend…….(that trend is lower)….and so – If the industrials pierce the June lows – then it would suggest that we will test lower still…..….Just fyi - The S&P is 120 pts away from breaching its June low….the Russell is just 71 pts away while the Nasdaq remains 500 pts away from that level….

Which now brings me to the circuit breakers- something that I think we should all just be aware of…(as we enter the earnings season during the month of October)…..those levels on the S&P that would trigger a market wide trading halt …..today that number is 262.99 pts….(7%)….markets would close for a minimum of 15 mins…….giving everyone time to breathe…..but that doesn’t mean the selling can’t continue once we reopen – it can and would have to drop an additional 13% to trigger the second halt….but let’s not go there….it’s just so you know.

Everything was red yesterday with the exception of Healthcare – XLV +0.5%.... Consumer Discretionary was the worst performing sector – losing 2.3% (and that makes sense), while Industrials – XLI gave up 1.5%, Financials – XLF down 1.6% and Basic Materials – XLB down 1.2%. All of the other sectors were all down by less than 1%.... The contra trades continue to surge…. the PSQ +1.3%, the SH +0.9% and the DOG +0.4% leaving these three hedges up 31%, 21% and 16% respectively….and again that makes sense…

In addition we saw broader weakness across other tech sectors – Semiconductors – SOXX continue to take it on the chin – down 2.7% leaving that ETF down 37% ytd….Cybersecurity – CIBR down 2.2% or 25% ytd and Artificial Intelligence – BOTZ down 2% taking that sector down 48% ytd….Which only means at some point (yet to be determined) – these sectors which play such a significant role in the economy will be set to surge……and offer outsized long term opportunities.

Economic data due out today includes 2 KEY metrics….S&P Global US Manf PMI – exp of 51 – just a hair above the neutral line (50)….and clearly on the edge of contraction (sub 50)….the other metric is S&P Global US Services PMI and that number is well into contractionary territory…..and it is expected to be 46.1….and that is important because the US economy is a 75% services economy………and it has now been in contraction territory for 4 months….Capisce? Hello? Anyone home?

Oil closed up on the day…. ending the day at $83.82/barrel. - Much of the action now being credited to the loss of Russian supply as the war in Ukraine continues to heat up; rebounding demand out of China and a stalled Iranian oil deal as the Iranians want the nuclear part of this deal to include the closure of ANY UN ‘watchdog’ investigations….LOL….so they want to come back into the oil market but they don’t want anyone watching what they are doing with their uranium production? (Think nuclear bombs) …… That makes sense….

This morning though – they are taking it down a bit – because the narrative this morning continues to be all about a slowing global economy as central banks around the world raise rates and push us over the edge of expansion into contraction….At 5 am…WTI is trading at $81.66…..leaving it bouncing along the lows created over the last month.

Gold is trading at $1670/oz…. feeling the pressure of the rising dollar.

US futures are lower again this morning as it appears that traders and investors are going to throw in the towel on this week in what feels like ‘the sky is falling’ type of event…..once everyone stops saying that they ‘think a recession is coming and accepts the fact that it is here already – then the psyche will change…….

Dow futures are down 180 pts, the S&P down 25 pts, the Nasdaq down 100 and the Russell off by 15 pts. Now if it makes you feel better – Treasury Secretary Janet Yellen is telling us that she is ‘convinced’ that JJ will be successful in bringing inflation down saying that ‘at some point next year’ we should start to see the benefits of his decisions….LOL… ‘some point next year’…..that’s like saying – at some point the sellers will stop being so aggressive and the buyers will take the market higher….which is true… ‘at some point’.

European markets are all lower by 1% as investors there continue to digest the latest moves out of a range of central banks that are combatting inflation…. Eurozone PMI fell to 48.2 down from 48.9 pushing the zone deeper into contractionary territory – this is the 3rd consecutive month of weaker PMIs across the zone….…. Surging energy costs hitting manufacturers hard…

Yesterday the BoE raised rates by 50 bps. The Swiss took rates higher by 75 bps finally taking that country out of ‘negative’ rates leaving rates there at 0.5% - Current Swiss inflation is running at 3.5%.

The S&P lost 32 pts to close the day at 3757…leaving us less than 100 pts away from the June lows….The idea that the June lows will offer plenty of support is now the question….S&P 3400 may be more realistic if the 3rd qtr. earnings season proves to be as weak as some are no suggesting……remember –JJ kept telling us that the economy is strong enough to handle rising rates….but that is proving to be ‘fake news’…..and that might cause the seasonal weakness (which I have also been warning about) to become even weaker……

You know me - I remain cautious about the coming earnings season….and am being patient…which does not mean I am paralyzed – it just means I am putting money to work in cash and a handful of names that I believe are at the core of a long-term portfolio.

Remember – we are in a seasonally difficult time –and a test lower is still very much a reality. Stick with the Big, Boring names/sectors…. Healthcare, Consumer Staples, Utilities, Energy and Big Tech.…. take advantage of the lower prices.

Penne rigate with carrots, onions and white wine sauce

Just spectacular!

For this you will need: 1 lb. penne rigate, olive oil, thinly sliced Vidalia onion, shredded carrots, chicken broth, 2 large egg yolks, s&p, 4 slices of thick cut bacon cut into small pieces, –1/2 c white wine, 1 cup of frozen peas, and fresh grated parmegiana cheese.

Bring a pot of salted water to a rolling boil.

In a large skillet, heat up some olive oil then add in the sliced onion and cook – stirring until tender...maybe 5 mins... Add the shredded carrots and chicken broth – cover and bring to a boil – now reduce heat to simmer and let cook for about 10 mins max. Strain thru a sieve – reserving the liquid.

Next add the carrots and onions to the food processor and puree. You will need to add some of the liquid – no more than a ¼ cup. Next – add the egg yolks and a dash of salt and pepper. Blend again. Set aside.

Now back to the skillet. Wipe it clean and now add the bacon and crisp it up – maybe 8 mins or so. Once done, place the bacon on a paper towel and discard the fat. (Do not wipe the skillet!) Now add the wine to the skillet and simmer – scraping up any browned bit of bacon. Simmer until it reduces to about 3 tblspns.

Now add the frozen peas and the vegetable/chicken stock. Simmer and cook the peas until tender....no more than 3 mins – you want them to be a bit crunchy.

Add the pasta to the pot and cook for 8 mins or so until aldente.

Drain the pasta, reserving a mugful of liquid. Toss the pasta with the carrot and onion puree. add in the peas and bacon and toss. Add a bit of the pasta water to keep it moist. Don’t forget the parmegiana cheese on the table for your guests.

General Disclosures

Information and commentary provided by ButcherJoseph Asset Management, LLC (“BJAM”), are opinions and should not be construed as facts. The market commentary is for informational purposes only and should not be deemed as a solicitation to invest or increase investments in BJAM products or the products of BJAM affiliates. The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. There can be no guarantee that any of the described objectives can be achieved. BJAM does not undertake to advise you of any change in its opinions or the information contained in this report. Past performance is not a guarantee of future results. Information provided from third parties was obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness.

Different types of investments involve varying degrees of risk and there can be no assurance that any specific investment will be profitable. The price of any investment may rise or fall due to changes in the broad markets or changes in a company’s financial condition and may do so unpredictably. BJAM does not make any representation that any strategy will or is likely to achieve returns similar to those shown in any performance results that may be illustrated in this presentation. There is no assurance that a portfolio will achieve its investment objective.

Definitions and Indices

The S&P 500 Index is a stock market index based on the market capitalization of 500 leading companies publicly traded in the U.S. stock market, as determined by Standard & Poor’s.


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