Hello everyone, another volatile week in the markets with price action bouncing around from one news event to another. Enjoy this week’s Weekly Round-Up
Market Sound Bites:
• Over the past few weeks we’ve seen the S&P move more than 1% for 12 consecutive days which the longest streak since this past Dec 2018 as worries about the Global Economy heat up from; plunging in global bond yields to over $16 Trillion in negative rates; intraday inversion of the 2s over 10s which we’ve not seen since July 2016; German 10 Year debt down to a negative 70 bps; Hong Kong Protests; falling US PMI data; rising Gov debt levels and predictions by former Fed Chairs we could see lower rates here in the US – all led to another volatile week here in US Markets…
• Falling PMI data (from last August reading of 60.8 to this past January at 56.6 to this past week’s July reading of 51.2 shows a slowly US manufacturing base…and according to a study by UBS of the past 9 business cycles going back to 1974 when PMI data was falling buying equities was a good move but when the PMI data closed on the 50 breakeven levels it became more risky and below the 50 levels buying equities did not work out as well…the risk/reward payoff when PMIs moves sub 50s levels indicates contraction and did not work out well…
• A bright note to the US Economy is the Consumer still is spending money as evidenced by this past week’s Retail Sales numbers…but we are seeing a slowdown in the US Economy and while there is an ongoing debate on the odds of a coming Recession in 2020 we’re seeing more risk off sectors holding up nicely – Utilities, Real Estate and Consumer Staples…and this come week, all eyes (and ears) will be on Jerome “Power Ranger Boom-Boom” Powell’s speech on Aug 24th at the Jackson Hole Wy Confab on monetary policy with this years theme appropriated titled “Challenges for Monetary Policy”….with their key inflation indicator, the PCE deflator running only 1.4% annually the CPI data did show overall inflation rising 1.8% YoY…essentially we’re seeing trade results are much weaker as a result of the US – China tensions, yet consumer spending is still strong…
• With so many balls in the air in Global markets trying to predict what will happen next have become very problematic and hence the rise in Volatility and the wider point swings in daily stock market price action…and many analysts don’t expect this to change for the remainder of this year so we will continue to see risk off type assets continue to perform well…and how the US Feds will respond in the coming FOMC Policy Meeting with markets predicting about a 100% rate cut for this coming Sept 18, and again at their next meeting on Oct 30th and for a final cut on Dec 11th this year…I suspect the markets are too optimistic for another 50 bps rate cuts…but how Powell will handle these next 3 meetings and the resulting press conference will be very important for near term price action and where we go next…and one final thought here; –the last 11 times Powell held a press conference the markets have fallen 8 times to that is a batting average of over 72%…so, history suggests we could be in store for more downside action unless Powell comes out forcefully to defend the markets and the interest rate disparity we’re seeing all across the Globe with that of the US…
Enjoy this Weekly Round-Up
Don’t Be A Rat Brain Trader – Be the Red Striped Zebra !!
Trade Smart !
hpb
