Xi Jinping

MEXICO TRADE RELIEF

Stocks opened higher today after US & Mexican negotiators reached a tentative arrangement to avoid new trade tariffs. The Dow is currently up 174 pts and the SPX is up 1%. Consumer discretionary, financials and technology sectors are all up 1.5% or more in early trading. The VIX Index—a common gauge of fear among traders—sank back to 16. European stock markets closed up by about .5% and most Asian markets were up over 1% last night. In the wake of the Mexico headline, the dollar strengthened and gold & bonds fell. WTI crude oil is trading flat just under $54/barrel. Most areas of the bond market are down today, except for junk bonds. The 10-year Treasury yield climbed back to 2.14%.


*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.

TRADE FRICTION TAKING A TOLL

The major stock market averages opened lower again today on trade tensions (Dow -278 pts; SPX -.9%). All eleven market sectors are down, led by Energy, healthcare, consumer discretionary, and communications (all down about 1%). European stock markets closed down over 1% as well, and most Asian markets closed lower last night. The one exception seems to have been the Shanghai Composite, which closed slightly higher on the session. Commodities are mixed today. Corn futures surged as flooding threatened crops. Copper rose .9% today after falling about 8% so far this month. WTI crude oil fell 2.7% to trade around $57.50/barrel. Bonds are trading mostly higher, especially safe-haven Treasuries. The 10-year Treasury yield fell to its lowest level since September 2017.


*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.

TRADE WAR II HERE TO STAY

Stocks opened lower again this morning (Dow -71 pts; SPX -.26%). But remember, the recent pattern has been a lower open with late afternoon recovery. At the moment, the energy sector is down 1.2% on concerns that China will reduce purchases of US natural gas. Tech, industrials and consumer discretionary sectors are down as well on trade tensions. Defensive sectors are in the green as traders shift into low volatility plays. The VIX Index is pretty low (14.8) considering current geopolitical tension. Commodities are mostly lower, led by oil. WTI crude fell back to $61.75/barrel. Copper is flat on the day, as is gold. In fact, gold has done nothing since the trade war reignited. Remember when gold used to be a dependable safe-haven play? Bonds are trading higher as yields edge lower. The 10-year Treasury yield is back down to 2.39%. All types of bonds—investment grade, junk, asset-backed, Treasuries, long-term, short-term—have done pretty well this year because interest rates are down.


*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.

RELIEF RALLY

Stocks opened higher this morning in an attempt to recover from a week-long 5% correction. The Dow is currently up 219 pts and the SPX is up 1.25%. Ten of eleven market sectors are in the green, led by tech (+1.9%), financials (+1.5%) and energy (1.7%). The VIX Index—a common gauge of fear among traders—fell back to 18.5. Oil prices also recovered after a series of attacks on Saudi oil tankers and pumping stations, presumably by Iran in retaliation for trade sanctions. WTI crude is back up around $61.80/barrel. Bonds are little changed this morning. The 10-year Treasury yield edged up to 2.42%.


*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.

FADING THE TRADE DEAL

FADING THE TRADE DEAL

Stocks gapped up at the open, only to quickly fade. The Dow is currently down 236 points, and the SPX is down 1.1%. All eleven major market sectors are lower, led by healthcare (-1.8%) and tech (-1.4%). As some type of US-China trade deal looks more likely—see below—traders are selling the news. European markets closed mixed but Asian markets rallied overnight. China’s Shanghai Composite Index is up over 20% so far this year. The US dollar is a bit stronger today, and commodities are mixed. WTI crude oil rallied back to $56.50/barrel, pretty close to the 2019 high. In fact, most commodity prices are higher this year after suffering declines late last year. Recently, President Trump has said he believes oil prices are too high and the dollar is too strong. I’m not sure why the market is reacting to these remarks, but it does feed day-to-day volatility. Bonds are trading a bit higher as yields tick lower this morning. The 10-year Treasury yield is back down to 2.73%.


*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.

WAITING ON MAR-A-LAGO

WAITING ON MAR-A-LAGO

Stocks gapped up at the open this morning following the Trump Administration’s announcement that it will further delay a scheduled trade tariff hike on Chinese imports. The Dow is currently up 157 pts and the SPX is up .45%. Cyclicals are leading the way—financials, industrials, tech, materials. And yet, the VIX Index is trading back up around 13.8. That’s not a high level, but one would typically expect the VIX to fall as the stock market rises. Commodities are mostly lower in early trading. WTI crude oil is down 3% today to trade around $55.30/barrel after President Trump complained to OPEC that oil prices are too high. I’m shaking my head in disbelief. If this isn’t proof that oil prices are routinely manipulated by traders and politicians, I don’t know what is. Bonds are trading mostly lower. The 10-year Treasury yield is back up around 2.68%. It has been trading between 2.65% and 2.70% for the last three weeks. As I mentioned last week, interest rate volatility has collapsed. By the way, Warrant Buffett says stocks are incredibly cheap if you think interest rates won’t skyrocket upward. If rates are relatively stable around current levels, stocks are attractive relative to bonds.


*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.

December 31, 2018

December 31, 2018

Stocks opened higher this morning but quickly lost steam. The Dow is currently up 150 pts and the SPX is up .33%. Healthcare is the best performing group in early trading, up about 1%. Retailers and tech stocks are also in the green. On the other hand, utilities & real estate sectors are in the red. The VIX Index fell to 27 this morning; the fear index spiked to 36 on Christmas Eve. Foreign markets were mostly higher in today’s session. Even China’s Shanghai Composite Index picked itself up off the floor. It climbed .4% overnight but is still down something like 28% for the year. It’s no secret that the emerging trade war has dented China’s economic momentum. Commodities are mixed today: copper -1.8%; oil flat; gold flat; iron ore +.2%. But the overall trend has been lower; during 2018 the Bloomberg Commodity Index fell nearly 13%. Bonds are mostly unchanged today. The 5-year and 10-year Treasury yields are hovering around 2.54% and 2.70%, respectively. Bond traders are saying the 2.70% mark is a key psychological support level and if the 10-year falls below that it will likely continue falling toward 2.6%. By the way, for all the massive volatility in the bond market this year, the 10-year yield will have gained a mere 27 basis points (.27%) during 2018.


*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.

December 3, 2018

December 3, 2018

Stocks surged at the open following a positive outcome at the G-20 meeting in Argentina over the weekend. The Dow is currently up 228 pts and the SPX is up .87%. Cyclical sectors (consumer discretionary, energy, industrials, tech, materials) are up over 1% in early trading. On the other hand, consumer staples and real estate sectors are in the red. European stock markets closed up about 1% and Asian markets were up 1-3% overnight. The dollar is weaker after the G-20 on reduced trade war tensions, and that’s giving some breathing room to commodities. WTI crude oil is up 3% to trade around $52.50/barrel. Despite the lower dollar, bonds are roughly flat on the day. The 5-year and 10-year Treasury yields are hovering around 2.83% and 2.99%, 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.

November 1, 2018

November 1, 2018

The major stock market averages opened higher this morning after a Tweet by President Trump saying he has re-engaged China’s president regarding trade tensions. The Dow is currently up 227 pts and the SPX is up .7%. Most sectors are rising, led by materials (+3%), and industrials (+1.5%). Those two groups are viewed as having the most sensitivity to trade tariffs.


*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.

July 25, 2018

July 25, 2018

Stocks opened mixed (Dow -75 pts; SPX +.17%). This is essentially the mirror image of yesterday’s trade. Utilities, real estate and consumer staples are in the green, whereas industrials, financials and consumer discretionary sectors are trading lower. It’s just more of the same back-and-forth without a discernible trend. Whereas European markets were up nicely yesterday, they’re poised to close down today. Bloomberg’s Macro Man column calls it “unremarkably quiet” as a result of “global confusion.” Anyway, commodities are trading a bit higher today (gold, copper, oil). WTI crude oil is trading flat at $68.60/barrel. Bonds are mostly unchanged. The 5-year Treasury yield, after a brief run higher last week, is sitting at 2.81% and the 10-year yield dipped to 2.94%.


*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.

July 19, 2018

Stocks gapped down at the open (Dow -86 pts; SPX -.29%). Utilities and real estate are rebounding, but most everything else is down in early trading. European markets are about to close down .4% and most of Asia was down overnight. China’s market is still down 20% on the year. WTI crude oil is trading up 1% to $69.50/barrel. Bonds are trading nearly flat yet again, and this month-long absence in yield volatility is not normal. That fact has some technical analysts calling for an upside breakout in yields sometime soon.


*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 10, 2018

Stocks gapped up at the open as trade tensions eased (see below). The Dow is currently up 525 pts and the SPX is up 1.8%. Materials, energy and tech sectors are all up over 2% in early trading. The VIX Index is back down to 20.7. European markets are up about .7% and Asia was up at least that much overnight. Oil, gas and metals are trading higher as well. WTI crude oil is back up to $65.20/barrel. Copper and iron ore are up well over 1%. Bonds are not surprisingly down in price. The 5-year and 10-year Treasury note yields ticked up to 2.63% and 2.80%, 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.

March 6, 2018

The major stock market averages opened mixed this morning. The Dow is down 104 pts and the S&P 500 is down .1%. The Nasdaq is up .14%. Utilities are down .8% and biotechs, banks and retailers are in the red. Gold miners, semiconductors and materials stocks are in the green. The VIX Index, which uses stock options to measure investor fear, is holding around 18.5. VIX March futures are at the same level. Whereas the VIX remained below 12 for most of 2017, it has been significantly higher (that is, more normal) this year. The dollar is weaker today (and down 2.7% so far this year) and commodities are mostly higher. WTI crude oil is trading down a bit to $62.30/barrel. Bonds are modestly higher this morning. The 5-year and 10-year Treasury note yields ticked down to 2.63% and 2.86%, respectively. The trend for interest rates has been mostly higher this year, so bonds have traded lower. The popular iShares IBOXX Investment Grade Corporate Bond ETF (LQD) is down 4% this year; the iShares 20+ Year Treasury Bond ETF (TLT) is down 6.5%.


*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.