November 20-24, 2023

Tactical Signal 9

Sowell’s technical indicators were positive but mixed on positive momentum against weaker economic fundamentals – remains in full position (100%).

Last week's media coverage prominently featured the geopolitical dynamics between President Biden and China's President Xi Jinping at the APEC Summit in San Francisco, juxtaposed against the shadow of a government shutdown and averted with another extension. From a geopolitical perspective, the events unfolded without notable incident. Contrarily, the financial markets demonstrated a precision akin to a sharpshooter, responding positively to indicators of economic contraction. Reports of reduced inflation, manufacturing, and retail spending collectively influenced market sentiment.

Year-over-year Consumer Price Index (CPI) registered at 3.2%, a decline from the preceding period's 3.7%. Industrial Production, with a year-over-year change of -0.6%, showed a decrease compared to the previous period's -0.16%. Retail Sales, exhibiting a 2.48% growth, fell short of the previous period's 4.05%. Consequently, the S&P 500 and Nasdaq composite experienced gains of 2.31% and 2.42%, respectively. Bond markets responded favorably, anticipating a decline in interest rates, leading to a 17 basis point narrowing in the 10-year Treasuries.

Despite ongoing positive momentum in the technology sector, last week's gains were predominantly driven by leaders in other sectors. Noteworthy performers included Financials (+3.43%), Industrials (+3.19%), and Consumer Cyclicals (+3.90%). Within the top 10 weighted stocks, Tesla emerged as the standout, posting a remarkable gain of over +9%, supported in part by the overall decrease in interest rates. Tesla's momentum was further buoyed by Exxon Mobil's bold declaration to emerge as a major producer of lithium, a move aimed at powering more than one million electric vehicles annually and helping affirm Tesla's early dominance in the electric vehicle market.

Looking ahead to the short trading week with the Thanksgiving holidays, attention will pivot towards leading retailers providing insights into consumer spending trends. However, the spotlight will be on NVIDIA's earnings report and its outlook on the state of artificial intelligence. Wishing you a Happy Thanksgiving.

“In this respect, the number one question for us is: are we adversaries, or partners? This is the fundamental and overarching issue. The logic is quite simple. If one sees the other side as a primary competitor, the most consequential geopolitical challenge, and a pacing threat, it will only lead to misinformed policymaking, misguided actions, and unwanted results. China is ready to be a partner and friend of the United States. The fundamental principles that we follow in handling China-U.S. relations are mutual respect, peaceful coexistence, and win-win cooperation.” – Chinese President Xi Jinping, San Francisco Welcome Dinner by Friendly Organizations in the U.S., Nov. 15th, 2023.

U.S. and China – Future Adversaries or Partners

The Asia-Pacific Economic Cooperation (APEC) Summit, a stage where regional leaders pirouette through the intricacies of free trade and collaboration, unfolded with precision in the City by the Bay—San Francisco—carefully choreographed by the maestros of diplomacy, the United States. As the spotlight cast its glow, the summit promised to be an eventful dance, particularly against the backdrop of a decelerating China, offering an opportune moment to mend fences with the U.S.

However, this diplomatic ballet took an unexpected turn. The anticipated theatrics between President Biden and China's President Xi Jinping gave way to a dramatic crescendo of controversies. Amid discussions on economic growth, trade policies, and regional integration, the summit's corridors resonated with the rhythm of debates and disagreements. The media, ever the keen-eyed choreographers, dissected every nuanced statement and gesture, turning the diplomatic dance into a spirited tango of conflicting narratives. Notably, President Biden's branding of President Xi as a dictator in a media interview, coupled with Secretary Antony Blinken's eye-roll reaction, became the headline act.

Yet, amidst the controversy, there emerged a poignant moment of reconciliation. President Xi, in his welcome remarks, eloquently extended an olive branch, emphasizing the historical ties between the U.S. and China. From the late 1800s, when the Chinese aided in building the transcontinental railroad, to San Francisco boasting the oldest Chinatown, and the Flying Tigers contributing to the fight against Japan in World War II—President Xi painted a tapestry of shared history, laying the foundation for a partnership rather than an adversarial stance.

The positive notes resonate in the enduring resilience of diplomatic relations. Despite the stumbling blocks, the shared responsibility of these global titans to enhance the well-being of the international community forms a sturdy platform for collaboration.

Advisory services offered through Sowell Management, a Registered Investment Advisor. The views expressed represent the opinion of Sowell Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and non-proprietary sources that have not been independently verified for accuracy or completeness. While Sowell Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sowell Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Past performance is not indicative of future results.


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