“When our perils are past, shall our gratitude sleep?” Michel de Montaigne

Veteran’s Day: Dad died on November 2, 2000. Requiescat in pace. At the age of 19, he was a member of the 390th Bombardment Group of the 8th Air Force, stationed at Framlingham, Great Britain. He was the group’s Lead Pilot, a Captain, and flew 31 bombing missions over Europe when only 18 were required. His missions included providing heavy bomb support for the Battle of Britain, D-Day, The Battle of the Bulge, and the Raid on Berlin. He was shot down in occupied France on his return from a successful campaign that destroyed much of Nazi Germany’s critically important ball-bearing factories in Dusseldorf. Nearly all of his crew were killed. He managed to make it back safely to Great Britain with the help of the French underground and little command of the French language.

He returned to Framlingham to resume his critically important role in defeating the evilest force the world had ever come face-to-face with: Nazism. He was awarded the Distinguish Flying Cross by John Doolittle, the Group’s commander, for his bravery in the face of danger.

Historians agree that the mighty 8th Air Force was critically crucial in turning the tides of WW2 in favor of the Allies. However, that success came at a high cost. The 8th Air Force’s losses were by far the most significant of any branch of the military at the time. According to the 390th Bomb Group Anthology, away from the extreme dangers of combat at altitude, “Fliers were subjected to the greatest physical, emotional, and psychological tests ever experienced by humankind.”

“The 390th Bomb Group participated in some of the greatest air battles in WWII including Schweinfurt, D-Day, and the Raid on Berlin. Among these was the raid on Munster on October 10, 1943. Battling the greatest concentration of enemy fighters ever encountered on an 8th Air Force mission — over 600 German aircrafts — the men of the 390th shot down sixty-two German planes while losing eight of their own eighteen aircrafts that day. The crew of ‘Cabin in the Sky’ defined the battle as the Battle of Britain. It was wrapped up in thirty-four minutes.”

He returned to Glen Ridge, New Jersey at the close of the war. Within two years he was married to my mother. Requiescat in pace. He went on to work on Wall Street for his father-in-law at C.J. Devine & Company. My parents were blessed with 12 children over the ensuing 20 years, the first six of which were daughters. I am the eighth child, second son. Being raised in a family of that size and given my father’s military experience, there was a premium placed on order. Numerical order. Mother would occasionally refer to me as 8-2.


As the three charts below clearly illustrate, last week was a good week for markets, and for those investors that have managed to stay long in recent weeks – despite the brutal sell-off that materialized. As I suggested would be the case, the bottom did not fall out of the market. Investor optimism was once again brought to bare as economic data and earnings fueled a relief rally – a rally that gained momentum last week.

Last week, however, investors were also the recipients of election results that proved a divided Washington. Some would argue that Washington has been the definition of a division for decades, and I would not argue that. That said, the street likes formal lines drawn around that division, and that is precisely what we received last week. Republicans gained seats in the Senate while Democrats picked up seats in the House.

Tuesday’s election results fueled the most significant one-day gain for equity markets in quite some time. Interestingly, on Thursday and Friday we witnessed some second-guessing. In fact, on Friday we saw all three major equity market indices lose ground – giving back some of the week’s impressive gains. The S&P 500 slipped 0.92%, while the Nasdaq fell a more meaningful 1.65%, and the Dow Industrials dropped 0.77%.

Of the three, the Dow Industrials were the only index to close out the week above both its 200 DMA and its 50 DMA. On Friday, the S&P tested its 200 DMA and held. The Nasdaq tested its 200 DMA on Thursday and failed. Friday it closed below both it’s 50 and 200 DMA. Though all three majors have reversed higher from their respective 10/26 lows and on volume, there remains much work to be done in the coming weeks to repair the technical damage done to markets in our recent sell-off. This week, I expect to see some consolidation of the gains that have materialized over the past two weeks.

Any directional cue we receive from upcoming earnings and the economic calendar will help investors gauge how we perform into year-end. On the earnings front, this week will be relatively quiet. Nvidia (NVDA), Cisco (CSCO), Walmart (WMT), Macy’s (M), and Home Depot (HD) will garner the lion’s share of investor attention. As always, guidance will also play a pivotal role for investors – in particular, guidance provided by WMT and M will be gleaned over.

Recent economic data has provided an interesting landscape for investors. Inflation has been and remains a central focus for the Federal Reserve, FOMC, and its impact on interest rates. On Friday of last week, the Producer Price Index (PPI) was released for October by the Bureau of Labor Statistics (BLS). On an M/M basis it came in at 0.6% — well above Econoday consensus of 0.2%. As a stand-alone data point, that CPI result immediately fueled concern over inflation and its impact on the future rate of monetary tightening. However, one of the principal drivers of inflation is showing signs of significant cooling – effectively offsetting the hotter-than-expected October CPI data. Since October 3, the global benchmark for crude oil, Brent, has fallen 19%. WTI crude oil has dropped 21% in the same period. As we have touched upon in recent notes, we are heading into the off-season for oil consumption.

Additionally, we have seen significant increases in rig counts, production, and stockpiles as evidenced by the Baker-Hughes weekly totals and the EIA Petroleum Status Report. It only makes sense that crude would come under pressure – irrespective of OPEC production limits. It has in fact entered into bear territory.

The recent downturn in petroleum prices is not likely to let up either. Energy experts are widely expecting a significant surge in shale oil production in 2019 here in the United States. That surge in production will likely keep pricing pressure on crude, though there are signals from OPEC that production cuts may be upped once again in coming months.

As with this week’s earnings calendar, the economic calendar is content light. However, given last week’s FOMC meeting, this week’s speech, to be delivered by Fed Chair Jerome Powell after markets close on Wednesday, will be a highlight. On Thursday, Weekly Jobless Claims, the Philadelphia Fed Business Outlook Survey, and Retail Sales for October and the weekly EIA Petroleum Status Report will all be released.

Banks are closed today in honor of Veteran’s Day. Equity markets will be open but expect volume to be lighter than average. Industrial Production for October is due out Friday morning at 9:15.

Kenny’s Commentary subscribers receive the note in their inbox Monday’s before the US markets open plus media and Sam Stovall’s analysis Subscribe