Well folks, these last two weeks of the year are upon us and they’re not starting out pretty with the S&P having already lost 6% from peak levels achieved last Tuesday - Read on for our thoughts on what these last few sessions of Q4 will have in store and make sure to watch out for the slew of housing data hitting the tape throughout the week, kicking off with the NAHB Housing Market Index today at 10AM! Additionally, in case you missed it, we put out a thematic piece on the battery metals landscape and a focus name within it ($GEMS), which you can check out here. Read on for your daily dose of market inspiration within this 177th Coachman’s Report!
Markets in Review
These last two weeks of the year are posturing for volatility, and from a historical standpoint, are likely to move against us towards the downside as large asset owners cut size in positions for tax-loss harvesting purposes. The silver lining? It’s a fantastic time to accumulate high-conviction names that will be brought down with this systematic market risk - moreover, with the S&P bouncing off its resistance and trading around its 200 day moving average it will be a decisive week for the directionality of NA equities in the short term within their current price channel. Additionally, the general risk-off sentiment of market participants has been substantiated with gold’s breakout and the pushing down of yields on USTs consistently over the last two weeks.
Lastly, the following will serve as a review of the data behind this Q3 reporting period as well as a preview of the most anticipated issuers announcing this week: Earnings Growth: For Q4 2022, the estimated earnings decline for the S&P 500 is -2.8%. If -2.8% is the actual decline for the quarter, it will mark the first time the index has reported a (year-over-year) earnings decline since Q3 2020 (-5.7%). Earnings Revisions: On September 30, the estimated earnings growth rate for Q4 2022 was 3.7%. Ten sectors are expected to report lower earnings today (compared to September 30) due to downward revisions to EPS estimates. Earnings Guidance: For Q4 2022, 63 S&P 500 companies have issued negative EPS guidance and 34 S&P 500 companies have issued positive EPS guidance. Valuation: The forward 12-month P/E ratio for the S&P 500 is 17.3. This P/E ratio is below the 5-year average (18.5) but above the 10-year average (17.1).
Long: Winnebago Industries Inc (WGO-NYSE) | Timeline: 2 days
Winnebago Industries, Inc. (WGO), which manufactures and sells recreation vehicles and marine products primarily for use in leisure travel and outdoor recreation activities, reported earnings Friday morning. The company managed to beat earnings and revenue estimates by 13.66% and 11.76%, respectively, as their “results are a testament to the strength, diversification and resiliency of our brand portfolio amid a dynamic macroeconomic environment”, says CEO Michael Happe. (Full Story) Turning to the chart, WGO hasn’t had too much success leading into 2023, however, the stock has been able to recover from lows in the $45 range back in May. As it continued to rally, a wedge has formed, establishing very solid points of support and resistance. That said, as the stock has edged closer to its current support followed by an oversold Stochastic RSI, it’s likely traders will see a rebound over the next couple of days.
Zooming out...
Checking In On Canadian Housing In the six months since our last special report on Canada’s changing housing situation, the market has fallen into a slump in terms of transaction sizes and volumes when compared to last year. In Toronto alone, selling activity has nearly halved when compared to the prior three years, while listings this year have been in line, if not slightly lower than 2019’s listing volume. Prices have fallen below last year’s average, however they remain moderately higher than 2020’s and are still far above 2019 levels.
Toronto’s real estate tribulations are being shared nationwide as roughly 60% of local markets saw lower sales in November. Additionally, non-seasonally adjusted nationwide sale volumes have fallen 10% when compared to pre-pandemic trends. It seems extremely likely that the residential market will continue to enter a downturn as there seems to be little relief for the consumer on the horizon as rates continue to rise, even if more slowly than they have been. Furthermore, the risk for negative equity still remains extremely high, especially for those investors who purchased a home within the last 24 months.
Making headlines...
Insurers shun FTX-linked crypto firms as contagion risk mounts
Insurers are denying or limiting coverage to clients with exposure to bankrupt crypto exchange FTX, leaving digital currency traders and exchanges uninsured for any losses from hacks, theft or lawsuits, several market participants said. (Full Story)
Turnover surges as funds rush to exit private equity stakes
Private equity holdings are being sold at a record clip in an opaque secondary market, investors say, as asset managers cash out to cover losses elsewhere and rebalance portfolios. (Full Story)
LG Energy Solution to invest in S.Korea battery production
South Korean battery maker LG Energy Solution said in a statement on Monday it plans to invest 4 trillion won ($3.1 billion) between this year and 2026 to build and expand cylindrical battery production in Ochang, South Korea. (Full Story)
Musk launches poll on whether he should quit as Twitter CEO
Twitter CEO Musk launched a poll on the social media platform on Sunday asking whether he should step down as head of the company, adding that he would abide by the poll results. (Full Story)
Chart of the Day: Gold Held in Central Bank Reserves
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