Stocks wobble, crypto holds onto gains as inflation jitters hang over global markets

Bad news: there’s plenty of red on the screens as we kick off the trading week. Not so bad: the losses are limited as investors hold out for more data on inflation, global growth and the labor markets. Another somewhat helpful factor this morning: bond yields are steady, holding below 1.50%.

Looking forward, all eyes will be on the September non-farms payroll report due out on Friday.

Next week the Q3 earnings season kicks off in earnest with Wall Street and the big banks reporting. Earnings news will be a nice distraction from all this preoccupation with inflation—unless of course, CFOs tell us they’re preoccupied with inflation. 🤔

Speaking of needed distractions, we always have crypto. Bitcoin is flat, but we’re a good 10% above last Monday’s levels.

Let’s see what else is moving the markets.

Markets update

Asia

• We begin the week with mixed markets in Asia. After an off-day on Friday, the Hang Seng is down 2.2% in afternoon trading. The exchanges on mainland China are off through Thursday.
• Adding to investor disquiet, trading in China Evergrande was halted Monday as the company said in a regulatory filing, according to CNBC, there’s a “possible general offer” for company shares in the works. Key word: “possible.”
• Remember the Phase 1 trade deal, struck during the Trump years? Turns out, China is not living up to its commitments, the U.S.’s top trade rep will announce today, CNBC reports.

Europe

• The European bourses were lower at the open with the Stoxx Europe 600 down 0.1% two hours into the trading session. Banks, autos and tech stocks were the big laggards at the start.
• The pound sterling is actually bouncing back, but the scenes from post-Brexit Britain—long waits at the petrol station, bare store shelves, spiking heating bills, soldiers deployed to ship essentials to the market—are making economists rethink their growth forecasts.
• The Pandora Papers came out over the weekend, showing where the ultra-rich and ultra-powerful are squirreling away their fortunes. So far names like Tony Blair, Jordan’s King Abdullah II and close associates to Russia’s Vladimir Putin are on the list with further revelations expected in the coming days. This won’t have any bearing on the markets, mind you.

U.S.

• U.S. futures have been trading sideways all morning. That’s after all three major exchanges bounced back on Friday, the first trading day of Q4.
• Shares in Tesla were up 2.1% in pre-market trading after the EV maker said this weekend it had delivered 241,300 cars in Q3, exceeding expectations. A reminder: Tesla’s AGM is tomorrow where it faces activist investors concerned about its supply chain.
• What’s on tap this week? We get PepsiCo Q3 earnings and PMI numbers (tomorrow), and the non-farm payrolls report comes out on Friday. Next week is the big start to earnings season with the banks reporting.

Elsewhere

• Gold is broken, or so it seems. Every time I check the price, it’s trading down, right around $1,750/ounce.
• The dollar is a touch lower. A Bull Sheet reader asks if, in a future essay, I can tackle the impact of a rising dollar on stocks. With earnings season nearly upon us, that’s a great idea. Consider it an ✔️on my to-do list.
• Crude is down, with Brent around $79/barrel.
• Bitcoin over the weekend held onto Friday’s El Salvador-inspired gains—yes, you read that correctly—trading around $47,500. Ethereum trades around $3,300.

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Bull Sheeters weigh in on the markets

For most stocks and crypto, September was a month to forget.

And, analysts aren’t all that bullish on October as inflation, uncertain global growth, rising bond yields, a spiking dollar and energy costs, supply chain bottlenecks, Congress as divided as ever, central bank tapering/tightening all presenting serious headwinds to equities.

We’ve heard plenty from the Wall Street pros. I want to now share a bit of the stock-and-crypto-trade wisdom from our collective Bull Sheet ranks.

Last week, as you’ll recall, I asked the question: has the recent markets volatility caused you to reassess your portfolio? In this rising interest rates environment, are you still bullish on stocks, or are you pulling out and waiting for things to cool down?

I got a lot of great responses.

Here they are: (A few have been edited for brevity.)

Why I’m bullish

I’m bullish, but for the intermediate-to-long term. I believe the chip shortage, supply constraints, debt ceiling and/or $3.5 trillion bill will cause bumps in the road in the near term. However, most of those are problems with identifiable fixes, so once that happens, I anticipate the markets to react positively. 

—A.M.

Cashing out

Last week I cashed in my managed account at a large retail stockbroker. What a good time to be on the sidelines with cash ready to spend and invest. However my orders did not all trigger because they were placed as limit orders. Now I am looking for the correct time to re-enter the market. When is that?

—R.F.

Don’t call it a bear market

Definition of a bull market: all bad news is discounted. Evergrande, (temporary) inflation, supply chain disruption, U.S .debt ceiling, congress malaise, you name it.

Defining of a bear market: all good news is discounted. We are not here yet.

Emerging catalyst: Central banks tapering/raising rates. That is the inexorable force out there, and green shoots abound!

—N.S.N.

Forget stocks. Let’s talk Bitcoin

The question for me, as always, is where BTC is going so I can be on the right side of my future trade. At the very least, I expect the Bears to hold the price level until the RSI [Relative Strength Index] is decent and then take the price downward, again. BTW all the talk about Brent and crude oil prices going through the roof yesterday and woke up this morning, and it’s dropped three dollars a barrel. Experts Schmeckperts.

—J.N.

Yeah, I guess I did say that

You said it yourself, Bernhard.

“..and equities still offer the only meaningful return out there.” 

—J.P.

Volatility breeds volatility

I think the reason for the volatility is the relative unknown of so many things:

• Will the US raise the debt ceiling in time?

• What will happen with the US/UK/AUS/FRA disagreement?

• What will happen with COVID over the next several months and even into 2022?

• What about the vaccine mandate for employers of 100 or more?

• Is there fallout from the Afghanistan mess?

• What happens in the VA gubernatorial race? Is it a harbinger of what will happen in next year’s midterms?

• What will happen with natural gas as we enter winter?

I can keep going, but I would say generally there are so many unknowns out there that people are unsure and I think that leads to volatility.

Any luck on finding your bike??

—A.W.

Me: Nope, no luck on my stolen-bicycle detective work.

Scilla, save us!

I think about [pulling out of the markets until things cool down]. I’ve tried it in the past. Sometimes, I’m right! And when I put the money back and score big, I feel like a genius.  

Still, as I ponder all the other times, I realize that the many ways of getting things wrong just keeps evolving and further burying the one or two ways of getting them right!  😕

All the delusion can be a little depressing. But reading your insights, lightened up with dog walk stories and bagels, helps.

—H.H.

***

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.

Today's read

South Dakota and Nevada play surprisingly large role in Pandora Papers tax avoidance leak—Fortune

Democrats Weigh Cutting Programs or Reducing Scope to Trim $3.5 Trillion Bill—Wall Street Journal

Market candy

Qu0te of the day

1929, 1987, and 2008 all come to mind when we think about this month.

That's LPL Financial's chief market strategist Ryan Detrick, who doubles as a kind of Wall Street historian, weighing in on Octobers of the past. This month, he says, "is known for some spectacular crashes and many expect bad things to happen again this year." A reminder that past performance—blah, blah, blah—future returns.