Results: Riding the post-FOMC rally
Portfolio was up 3.8% last week.
Quick summary:
Two more weeks left in the Q4 competition, and it’s getting tight.
The survey is up & running - click here.Last week the Fed delivered a dovish pivot in its final meeting of the year, anticipating 75bps of cuts for next year. It sent the markets rallying as investors started to price in 150bps cuts. Exciting times.
We took advantage of the rally, and even though it lost steam on Thu and Fri, we still managed to pull 3.8% gains last week for the BASON portfolio.
This week we get the core PCE inflation numbers on Friday. This is the one the Fed is projecting to go down to 2.4% next year. We also get a bunch of economic data this week (building permits, manufacturing, housing, jobless claims, consumer sentiment, etc.).
The bull 🐂 and bear 🐻 cases were delivered over the past two weekends. Hope you’ve enjoyed them. After last week’s pivot, advantage bulls in 2024. But we’re not done yet. This Saturday, just before Christmas, we will send you our predictions and positioning for next year. Don’t miss it!
The Q4 competition is entering its two final weeks of the year. As if the competition wasn’t tough enough, the last two weeks saw some big changes up top. The bulls are taking over the Q4 leaderboard, and this is starting to make a difference on the annual rankings as well.
No pressure guys, but it’s on :) good luck for the next two weeks!
We’ll announce the winners of both Q4 and the annual competition on Dec 30th (day after the markets close for the year). We’ll pay out the prizes for both Q4 and the annual ranking together, but only after we get our final calculation of the fund’s total profits for the year, and allocate the 3% of our profits to all of you worthy participants. The year will end on a high note, and you guys were a very important part of that, so thank you! I’ll do a special post on your performance in the new year.
Note: for next year, the competition will reopen on Jan 9th.
NOTE: For all those new to the whole thing, here is a video of Scott and myself guiding you through the survey, showing you all its features, and briefly explaining how the competition works.
Last week’s performance
Coming into last week this is what we said:
What they will look at is the projection of the Federal funds rate for 2024. Last time, in September, the projection was at 5.1% (see table below). This time, after the latest policy statements from Fed members, the ease in inflation, and the change in expecations since Nov 1st, pricing in over 100bps of cuts for next year, this is likely to go down as well. Not by >100 bps, but down to say 4.7 or 4.8%.
The official projection came in even lower than that, at 4.6%, pricing in three cuts next year (75bps), to which the market responded by pricing in 6 cuts for next year, starting in March already. The soft landing is the baseline scenario now.
This was quickly priced in during the Powell press conference, and we jumped on board sooner rather than later (as the BASON was bullish prior to the presser).
The majority of last week’s profits were achieved already on Wednesday, and again following a strong open on Thursday. We took them early enough next day as S&P500 ripped through 4,700. By Thursday open, our call positions pushed us up by almost 4.5%. We took advantage of the big move and during the day took most profits, leaving a quarter of the position open. As the price action reversed a bit during the day, continuing to do the same on Friday, it reduced the total weekly gain to 3.8%, but still adding to an impressive week overall.
This week the most important data point comes on Friday before open, the core PCE inflation number. This is the one the Fed watches (and was in their projections last week). It is expected to continue going down, in line with the general inflation trend. However, did the markets already overshoot on this, or is there more ammunition left? We’ll find out.
We also get a bunch of economic data, most of which is important in forming the leading economic indicators. Things like building permits (Tue), the manufacturing index (Thu), new and existing home sales (Wed and Fri), jobless claims (Thu), Q3 GDP (Thu), consumer sentiment (Fri), etc. The main focus for markets is on PCE inflation, but do keep an eye on the others in light of the whole bear vs bull narrative for next year.
…join the $20,000 competition!
Join our survey competition to get an opportunity to participate in our quarterly ($5000) and annual (3% of our profits) prize distributions:
DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.
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