Steven Mnuchin

July 16, 2018

The major stock market averages are meandering aimlessly today (Dow & SPX flat). Financials are up 1.2% after some positive earnings announcements (see below). Telecoms are also higher in early trading, but most other sectors are in the red. The VIX Index jumped back up to 12.6, but that’s still considered very low. Most European markets will close down slightly today, and except for Japan, Asian markets were down overnight. Oil is taking a hit, down 3% after Treasury Secretary Mnuchin said some US oil importers could get waivers to continue buying Iranian oil temporarily. “We want people to reduce oil purchases to zero, but in certain cases if people can’t do that overnight, we’ll consider exceptions.” Seems like a massive over-reaction by oil traders, but they’ve always been good at creating volatility where it’s not needed. Anyway, most other commodities are also in the red today. Year-to-date, the Bloomberg Commodity Index is down 5.7%. Bonds are trading modestly lower this morning as yields tick upward. But there is now only 10 basis points difference between the 5-year and 10-year Treasury note yields. The yield curve continues to flatten.


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

June 25, 2019

Stocks fell at the open on fresh trade provocations by the Trump Administration. The Dow and SPX are currently down 366 pts and 1.3%, respectively. Again, industrials and materials—which would fare the worst in a trade war—are down about 1%. The tech sector is down nearly 2% as semiconductors are also seen as vulnerable. On the other hand, defensive sectors like utilities and telecoms, are in the green. Asian stock markets continue to fall. The Shanghai Composite is down 20% from its January highs. The US dollar is about 5.5% stronger than it was in mid-April, and the Bloomberg Commodity Index is down 4.5% over the same period. WTI crude oil is down slightly to trade at $68.36/barrel. OPEC agreed to a vague increase in oil production.


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

May 24, 2018

Stocks sank at the open this morning after President Trump canceled the nuclear summit with North Korea. The Dow is down 190 pts and the SPX is down .47%. Wow, the stock market is doing a terrible job of ignoring day-to-day political rhetoric. It fell head-over-heels for Mnuchin’s overly optimistic messaging on the China trade negotiations, and now it feigns total surprise that the North Korean summit may not happen. There are a few groups trading higher today. Utilities are up for the second consecutive day, and telecoms are trying to rebound from a 3-month slide. Industrials are also up modestly because the dollar is a bit weaker. Commodities are mixed in early trading. Gold is up 1%, not surprisingly. WTI crude oil is down 1% to $71.10/barrel. Bonds are trading up today—and over the last week—as yields dip. The 5-year and 10-year Treasury yields are back down to 2.80% and 2.96%, respectively. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

May 21, 2018

Stocks are surging after Treasury Secretary Mnuchin put a positive spin on trade negotiations with the Chinese. So don’t expect it to last. The Dow is currently up 280 pts and the SPX is up .65%. All eleven major market sectors are in the green, led by industrials (+1.5%) and financials (+.8%). Commodities are  mostly higher as well. WTI crude oil is up 1% to trade around $72/barrel. The march higher continues, and investors are starting to think about commodity inflation’s eventual impact on consumer spending the corporate earnings. Bonds are mostly unchanged today. The 5-year and 10-year Treasury yields are hovering around 2.90% and 3.01%, respectively.


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

April 9, 2018 Special Update

Up One Day, Down The Next

Last Friday’s jobs report was supposed to be the big event of the week. It was supposed to either send the all clear signal or upset the apple cart; to confirm or deny a spike in wage inflation; to let us rest easy about labor market strength or perhaps reveal a slowdown in hiring momentum. Alas, it never delivered the excitement traders were looking for. 

Not that Friday’s trading session lacked excitement. The Dow fell 572 points and the S&P 500 fell 2.2%, capping a week of extraordinarily large rollercoaster swings. In fact, Vanguard’s Jack Bogle said that with the possible exception of the 1987 crash, he’s never seen such volatility as characterizes this stock market. 

The jobs report and its standard set of figures on payrolls, unemployment, and wage growth turned out OK. Inflation isn’t spiking. The labor market isn’t over-heating. New payroll growth decelerated, but that was largely due to weather-related issues. Other metrics like average workweek were on track. Just as with other recent economic data, there’s nothing in the report to cause an unhinging of the stock market. Nothing to explain the spike in volatility. 

What hit the market on Friday was the perfect storm of words, not data. President Trump is again engaged in a war of words with the Chinese. Thursday evening, Mr. Trump asked the US Trade Representative to consider additional trade tariffs on $100bil worth of Chinese imports. In response, China’s Commerce Ministry issued a statement that it is ready to fight a trade war. “The Chinese side will follow suit to the end and at any cost, and will firmly attack, using new comprehensive countermeasures, to firmly defend the interest of the nation and its people.” On Friday morning, Mr. Trump Tweeted that the World Trade Organization (WTO) is giving an unfair trade advantage to China due to its classification of that country as “developing.” But while the war of words progressed, neither side moved closer to face-to-face negotiations. 

And there are signals that this issue isn’t going away soon. US Treasury Secretary Mnuchin said in a CNBC interview that while the Trump Administration doesn’t want a trade war, “there is the potential” for one. He is “cautiously optimistic” that both sides will reach a solution. In a radio interview, the president said, “I’m not saying there won’t be a little pain, but the market has gone up 40%, 42% so we might lose a little bit of it. But we’re going to have a much stronger country when we’re finished.” 

Also thrown into the mix on Friday was congressional testimony by the new Federal Reserve Chair Jerome Powell. He noted strong economic momentum in the US. “Given that the current pace of growth is above trend, my view is that we need to continue on the path of raising interest rates.” Mr. Powell’s message was a positive one, as expected. But considering the day’s events, investors were not in the mood to hear about further monetary tightening. The Dow took another leg down as he spoke. Mr. Powell tried to steer clear of trade tariff concerns, but when asked he said it’s “really too early” to estimate any economic impact. 

In that reply, Mr. Powell showed wisdom. We don’t yet know whether Mr. Trump’s sound bites constitute a new durable policy or simple rhetoric used as a negotiating tactic. We also don’t have a clue about the timeline for tariffs. Mr. Mnuchin said they “will take some period of time to go into effect. There will be public comment, while we’re in the period before the tariffs go on. We’ll continue to have discussions.” Besides, words change from day to day. Over the weekend, Mr. Trump eased his tone, Tweeting “President Xi and I will always be friends, no matter what happens with our dispute on trade.” Hence, the stock market bump this morning. 

The culprit for market volatility is clear. Words, in speeches, interviews and Tweets, made traders shoot first and ask questions later. That immediate re-pricing of investment risk may prove to be unwarranted, however. Aside of positive economic momentum, corporate earnings are expected to be very strong this year. Core business trends are largely positive and by one estimate $800bil in economic benefit will come from tax reform. US companies will begin reporting first quarter results this week, and we very much hope that investors and traders pay more attention to those reports than to presidential Tweets. As Bloomberg posits, “Markets Want to Rally—If Politicians Will Let Them.”
 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

October 4, 2017

Stocks opened mixed this morning (Dow +20 pts; SPX flat). Gold miners, biotechs and consumer staples stocks are modestly higher. In addition, interest rate sensitive sectors like real estate and utilities are rebounding a bit. On the other hand, technology, banks and industrials are modestly lower. WTI crude oil is flat on the day around $50.40/barrel. Bonds are slightly lower as yield tick higher. The 5-year and 10-year Treasury yields are hovering around 1.93% and 2.34%, respectively. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

June 20, 2017

Stocks opened lower this morning after achieving fresh all-time highs yesterday. The Dow is currently flat and the SPX is down .4%. The energy sector is down over 1.5% in early trading as oil prices continue to fall. In addition, telecoms and transports are down 1%. The VIX Index is hovering around 10.5 and VIX July futures are trading around 12.2. The dollar is stronger on the day and most commodities are weaker. The dollar has been sliding since the beginning of the year, but has staged a small come-back over the last two weeks. As mentioned, WTI crude oil is down under $43/barrel, the lowest since August 2016. That is clearly spooking the stock market. But bonds are barely moving this morning. The 5-year Treasury yield is hovering around 1.78% and the 10-year yield is trading at 2.17%. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

April 27, 2017

The major stock market averages opened modestly higher but quickly faded. The Dow is down 34 pts and the SPX is down .1%.  Retailers, semiconductors, rail lines, and social media are trading up this morning. Energy, banks, and telecom carriers are down sharply. The VIX Index is down again today to trade under 11, signaling very little fear among traders. European markets are poised to close down about .5%. Commodities are mostly lower (gold -.3%, copper -1.1%, WTI crude oil -2.6%). It really looks like oil wants to fall toward $47/barrel in the near term. Bonds are modestly higher in price as yields edge lower. The 5-year Treasury yield is trading at 1.82% and the 10-year is trading at 2.29%. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

February 23, 2017

The major stock market averages are lower in early trading. The Dow is currently flat and the SPX is down .23%. The defensive sectors are doing better (utilities, consumer staples, telecoms) but most other sectors are lower (i.e. tech, industrials, financials, materials). By the way, year-to-date the SPX is up 5.4% and the best-performing sectors are tech (+9%) and healthcare (+7%). The only two sectors in the red for the year are energy (-5.8%) and telecom (-3.7%). Today, the dollar is a bit lower and commodities are trading a bit higher. WTI crude oil is up 2% to $54.68/barrel. Bonds have been moving higher for the last week, with yields headed lower. The 5-year Treasury yield is back down to 1.87% and the 10-year yield is trading at 2.39%. The 2-year Treasury yield isn’t spiking either, and that suggests traders aren’t convinced the Federal Reserve will raise interest rates in March. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.