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Bonds and stocks are extending their retreat this morning ahead of crucial US jobs data. Swaps traders are recalibrating expectations, now giving a 65% probability of a Fed rate cut by March, a significant shift from almost full pricing just a week ago.

Meanwhile, crude futures experienced an upswing this week, marking the first positive movement since Boxing Day. However, the intrigue lies in what's been restraining oil prices, despite escalating tensions in the Red Sea and the looming specter of a broader conflict in the Middle East.

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Markets

Bonds, Stocks Extend Retreat Before US Jobs Data (2 minute read)
Treasuries are experiencing a significant decline, marking the most substantial weekly retreat since October. This decline is driven by speculations that the Federal Reserve may postpone interest-rate cuts due to the robust state of the labor market.

Stocks are facing a downturn, and the dollar is strengthening for the sixth consecutive day. Traders are eagerly awaiting the US nonfarm payroll report, anticipated to reveal the addition of 175,000 positions in the past month. Despite a slower hiring pace than November, this would still underscore economic strength and challenge prevailing beliefs that monetary policy should be eased further.

Swaps traders are currently assigning a 65% probability to a Fed rate cut by March, down from nearly full pricing just a week ago.

Here’s what’s been keeping a lid on oil prices despite risks of a wider war in the Middle East (3 minute read)
Crude futures registered an ascent on Wednesday, marking the first price gain since the day following Christmas, even amid escalating tensions in the Red Sea, heightening concerns of a broader conflict in the Middle East that could disrupt oil flow in the region.

While the fear of supply disruptions in the Red Sea failed to significantly impact oil prices in the past week, specific unrest in Iran, a crucial oil-producing nation, triggered a rally on Wednesday. However, Denton Cinquegrana, chief oil analyst at OPIS, noted that oil prices haven't experienced substantial gains due to the lack of impact on production. He emphasized that the primary effects are on shipping costs and time, rather than posing significant risks to the passage of oil tankers through the Red Sea.

Chinese Shadow Bank Files For Bankruptcy (2 minute read)
Chinese wealth manager Zhongzhi Enterprise Group has initiated the process of bankruptcy liquidation due to its inability to repay debts, grappling with the deepening downturn in the property market. The company cited insufficient assets to meet its outstanding obligations as the basis for filing bankruptcy. As a significant player in China's $3 trillion shadow banking sector, equivalent to the size of the French economy, Zhongzhi's worsening situation raises concerns about the potential spillover of the country's property debt crisis into the broader financial sector. With substantial exposure to China's real estate sector, the company issued an apology to investors in November, acknowledging its significant insolvency with liabilities amounting to up to $64 billion.

Investing

Tesla recalls over 1.6 million EVs exported to China (3 minute read)
Tesla has issued a recall for over 1.6 million Model S, X, 3, and Y electric vehicles exported to China, citing issues with their automatic assisted steering and door latch controls. The recall specifically addresses problems with the automatic steering assist function and encompasses 1.6 million imported Tesla Model S, Model X, Model 3, and Model Y vehicles. This move follows a recent recall in the United States involving over 2 million Tesla EVs aimed at enhancing the monitoring system for drivers. Despite being the second-largest seller in China's rapidly growing electric vehicle market, Tesla trails behind the market leader, Chinese auto company BYD.

Eight Ways I’m an Active Investor (5 minute read)
Allan Roth is renowned for his approach as a conservative, passive investor. His fundamental portfolio comprises cap-weighted total U.S. and total international stock index funds, along with a portion allocated to a total-bond index fund—a strategy he often suggests to his clients. Advocating a long-term perspective with a favorite holding period of "forever," Roth adheres to buy-and-hold principles until clients enter the decumulation phase of their lives.

Despite championing passive investing, it's worth noting that Roth adopts a more active stance for his personal portfolio and recommends similar approaches to his clients. Here are eight ways he engages in active investing.

How Carvana avoided catastrophe in 2023 (2 minute read)
Carvana successfully navigated a crisis in 2023 that had previously marred its reputation as a high-flying retailer revolutionizing the traditional automotive industry. According to CEO Ernie Garcia, the company has shifted its focus to prioritize its bottom line. Once hailed as the "Amazon of used cars," Carvana now faces the challenge of competing with Amazon itself. The company gained widespread attention for innovations like "car vending machines" and nationwide vehicle deliveries but incurred significant debt during the pandemic as it prioritized rapid expansion over profitability. Following a debt restructuring deal in the summer, Carvana experienced a remarkable resurgence, with its stock surging over 10-fold in 2023, escalating from less than $5 to over $55.

Money

How Regular Families Could Be Affected if Tax Cuts Expire (4 minute read)
As the 2017 Tax Cuts and Jobs Act (TCJA) approaches its sunset, much discussion will focus on the reduction of lifetime generation-skipping, estate, and gift tax exemptions. However, if your net estate falls below the $7 million post-TCJA exemption (or $14 million for a married couple), this may have limited impact on you. Instead, attention should be directed towards other pertinent sunsetting provisions. Notably, the sunset will bring changes to various aspects, such as income tax tables, the standard deduction, personal and dependent exemptions, and the child tax credit. These modifications hold significance for a broader range of individuals, prompting a need for awareness and consideration.

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