Well folks, it is now week #2 of 2023 and the market will be looking towards Thursday’s inflation print to set the tone for the February 1st FOMC meeting in three weeks - Economists are currently expecting 0.3% price growth for the month of December. Speaking of the macro picture, today we’d like to highlight a special report we published on investing within an industry at the intersection of ecommerce and healthcare - online pharmacies, read more on that below as well as stories on the newly elected speaker of the house and the current situation in Brazil within this 190th Coachman’s Report!
Markets in Review
Futures are in the green during this morning’s premarket trading session with the Dow, S&P and Nasdaq respectively up 22, 31 and 38 bps at the time of writing. With last week’s jobs data coming in above expectations and the market repricing over Friday’s session (S&P +2.3%), there is now a 77% probability of a 25bp rate hike at the February 1st FOMC meeting; the key in sealing the fate of this manageable hike will be a CPI either within or below economists forecasts on Thursday. That said, the Q4 reporting period is starting up and the following is a schedule of the issuers announcing this week as well as a preview of the season, by the numbers.
Earnings Growth: For Q4 2022, the estimated earnings decline for the S&P 500 is -4.1%. If -4.1% 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 3.5%. 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, 65 S&P 500 companies have issued negative EPS guidance and 35 S&P 500 companies have issued positive EPS guidance. Valuation: The forward 12-month P/E ratio for the S&P 500 is 16.5. This P/E ratio is below the 5-year average (18.5) and below the 10-year average (17.2). Earnings Scorecard: For Q4 2022 (with 20 S&P 500 companies reporting actual results), 15 S&P 500 companies have reported a positive EPS surprise and 13 S&P 500 companies have reported a positive revenue surprise.
Short: Tilray Brands, Inc. (TLRY-NASDAQ) | Timeline: 2 days
Tilray Brands, Inc. (TLRY), which engages in the research, cultivation, production, marketing, and distribution of medical cannabis products internationally, reported substandard earnings this morning. The company, unfortunately, missed earnings and revenue estimates by 94.12% and 6.88%, respectively, amid price compression and difficult operating conditions, especially within Canada. (Full Story) Turning to the chart, TLRY investors have experienced major turmoil over the last year, falling from highs of just over $8 - and from around July to late December, oscillating within a narrow price channel. That said, support was broken leading into this quarter’s earnings call, and with the company’s result, it's likely the price will continue to fall, especially with the Stochastic RSI back in an extremely overbought position.
Zooming out...
A House United
After the 15th round of voting, Kevin McCarthy was elected as the Speaker of the House early Saturday morning. As we touched on previously he was originally unpopular among 20 Republican holdouts that were not confident in McCarthy’s ability to break with entrenched political processes. However, after McCarthy agreed to meaningful compromises that included; reinstating a rule that allows for any individual member of congress to call a vote of no confidence, limits on spending, the creation of the Republican version of the January 6th committee, along with the institution of a rule that gives members 72 hours to review legislation prior to a vote- he was able to gather the ‘present’ votes necessary to win.
This is great for those within the United States as now essential congressional protocols including the swearing-in of new members along with necessary oversight over various departments and agencies can continue as normal. Moreover, due to these concessions, the speaker role wields far less power than when the position was held by Nancy Pelosi over the last 7 years, and as such individual representatives will have a larger say in the body’s deliberations.
Jan 8
There was chaos in Brazil over the weekend as thousands of supporters backing former President Jair Bolsonaro stormed the presidential palace, Congress and Supreme Court leaving massive damage in their wake. As we covered late last year, much like Trump, Bolsanaro (who is now residing in Florida) has denied the results of the extremely tight election that was held last year, even as successor Luiz Inacio Lula da Silva has been inaugurated.
In response to the demonstrations, a federal security intervention has been ordered until the end of January even as Bolsanaro has stated that demonstrators causing violence are “outside of the law”. By late Sunday evening the buildings were retaken by government forces and the riots were quelled to allow the state to bring about a return to order.
Special Report - Investing in Online Pharmacies and Finding the Right Strategy
As fears of long-term economic stagnation increase and as interest rates continue to rise, defensive growth industries should be on investors' radars. The sector being discussed today is the emerging and fast-growing online pharmacy industry. The online pharmacy industry is a compelling defensive growth industry because it’s recession-resilient, meaning revenues don’t fluctuate heavily with the business cycle. Additionally, with the dire need for a more efficient healthcare system, online pharmacies have fertile ground for future growth as it could potentially fill some of the holes in the Canadian healthcare system. Today, we uncover the current competitive landscape for the online pharmacy market and what investors should look for in an online pharmacy’s business strategy…Read the rest of this report by Alex Ponte here!
Making headlines...
Morgan Stanley Warns US Stocks Risk 22% Slump
US equities face much sharper declines than many pessimists expect with the spectre of recession likely to compound their biggest annual slump since the global financial crisis, according to Morgan Stanley strategists. (Full Story)
Stocks Extend Risk Rally on China; Dollar Weakens
Stocks extended global gains in risk assets, driven by China’s reopening trade and expectations of slower rate hikes. The dollar weakened and oil rallied. (Full Story)
Nurses go on strike at 2 big New York City hospitals
Nurses at two of New York City's largest hospitals went on strike Monday in a dispute over pay and staffing levels after a weekend of negotiations did not produce a deal for a new contract. (Full Story)
Global Central Banks Aren’t Declaring Victory Over Inflation Yet
Central banks aren’t giving up their inflation fight yet with the peak in interest rates still to come in most economies, but pauses will come at some point in 2023 — and perhaps even pivots. (Full Story)
Chart of the Day: Eggs are booming…
“The less people know about how sausages and laws are made, the better they sleep at night.” - Bill Browder
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