Well folks, today will breed a soft start to the week for financial markets as US exchanges are closed for Martin Luther King day - as such we will be focusing on Canadian equities within today’s newsletter. That said, things are sure to heat up with a slew of big-ticket earnings kicking off this Q4 reporting period, so read on for more within this 196th Coachman’s Report!
Markets in Review
The TSX has been ripping since the start of the year - having returned 5% since January 1st! As a result, the index experienced a golden cross event last Friday with the 50-day moving average crossing above the 200-day MA, this is confirmation of a strong bullish trend. Much of these gains can be attributed to senior precious metal producers such as Kinross, Barrick and Wheaton, which are all up over 12% since the start of the year. Pictured below is gold’s price in orange overlaid to the TSX60 - since early November, gold has run 16.73%, bringing it to over $1900/oz; much of this run has been the outcome of heightened buying by central banks across the globe as inflation continues to rage on.
The following will serve a review of this current earnings season and a preview of the issuers reporting through the week: Earnings Growth: For Q4 2022, the estimated earnings decline for the S&P 500 is -3.9%. If -3.9% is the actual decline for the quarter, it will mark the first time the index has reported a year-over-year decline in earnings since Q3 2020 (-5.7%). Earnings Revisions: On September 30, the estimated earnings growth rate for Q4 2022 was 3.5%. 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, 67 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 (17.2). Earnings Scorecard: For Q4 2022 (with 29 S&P 500 companies reporting actual results), 23 S&P 500 companies has reported a positive EPS surprise and 20 S&P 500 companies have reported a positive revenue surprise.
Long: TRX Gold Corporation (TNX-TSX) | Timeline: 2 days
TRX Gold Corporation (TNX), which engages in the exploration, development, and production of mineral property interests in the United Republic of Tanzania, reported stellar earnings this morning before market open. The company managed to beat earnings and revenue estimates by 97.64% and 18.41%, respectively, as the company reported a 49% increase in quarter-over-quarter gold production - mainly attributable to an increase in ore tonnes milled, following the commissioning of the expanded 1,000+ tpd processing plant in Q1 2023. (Full Story)
Turning to the chart, the company has had quite a volatile last 12 months, oscillating between lows of $0.35 and highs of $0.71. That said, as the stock has bounced off the channel’s lower end, it has blown through the mean, and is likely to continue this bullish momentum supported by a spike in buying pressure and a MACD above its equilibrium, while still pointing bullish.
Zooming Out...
Biden’s Document Blunder
Over the past week, it was revealed that troves of classified documents have been found throughout the residences and offices of Joe Biden. The documents date back to his time as VP under the Obama administration and reportedly have classified markings.
The first set was found last December inside the garage of Biden’s Delaware residence, and in the following days, more were found within his offices at the Penn Biden Center for Diplomacy and Global Engagement. Moreover, this week a further series of pages were found within the residence itself.
In the aftermath of the appointment of a special counsel, some prominent Democrats including California rep Adam Schiff have begun turning on the President- claiming he could have jeopardized national security with the blunder. The whole scenario is somewhat ironic due to the similar ongoing investigation into classified documents at Mar-a-Lago.
Ceilings Were Meant to be Broken
Treasury Secretary Janet Yellen has announced that the United States will breach the debt ceiling this week, likely on Thursday. Yellen has stated that the U.S. will have to resort to "extraordinary measures" to avoid a default, while urging congress to create legislation to raise, or suspend the ceiling. With that being said, the freshly elected Republican House majority has been creating stipulations for the talks to begin. The GOP has stayed firm on their demands for spending cuts to occur before talks begin, while Democrats have stated there is potential to work on spending reductions going forward, however remain adamant that all current debts should be settled now before a government shutdown.
Although it would be the best case scenario for an agreement to be reached prior to Thursday, the Treasury’s extraordinary measures can sustain the country until June.
Making Headlines...
As Davos opens, Oxfam urges windfall tax on food companies
Food companies making big profits as inflation has surged should face windfall taxes to help cut global inequality, anti-poverty group Oxfam said Monday as the World Economic Forum's annual meeting gets underway. (Full Story)
Asian shares cautious, BOJ faces crunch policy decision
Asian shares started cautiously on Monday as investors waited nervously to see if the Bank of Japan (BOJ) will defend its super-sized stimulus policy at a pivotal meeting this week, while a holiday in U.S. markets made for thin trading. (Full Story)
Oil Steadies as Investors Assess the Impact of China’s Reopening
Oil was steady as the week’s trading kicked off, with optimism that China’s reopening will boost energy demand balanced by the prospect of slowdowns in other parts of the world. (Full Story)
Pfizer Bivalent Vaccine Linked to Strokes in Preliminary Data
Pfizer Inc.’s bivalent shot for Covid-19 has shown a potential link to stroke in people 65 and older, according to US health officials citing preliminary data from one of several vaccine safety databases. (Full Story)
Chart of the Day: New York Fed probability of recession @ 47.3082%
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