This Morning's Data Looks Good! Inflation, while definitely brewing, reads tamer than I expected...

This morning's data dump is interesting.

As for what it says about the present state of the economy -- it's full steam ahead!

What's interesting is, save for the Chicago PMI -- notwithstanding the below-the-surface pressure you'll note below -- it's tamer on inflation than I might've guessed at this juncture. 

Persimmons, Cinnamon Rolls and Oatmeal, In Perfect Harmony!

So let's say that you love persimmons, and that I happen to grow the consistently best you've ever eaten, and at a great price to boot.

Charts of the Day: Do Not Blame the Fed!

This is stuff the White House needs to pay very close attention to:

This Week's Message: We'll Hope For Scenario 3, But We'll Work With Whatever We Get

My fundamental view of the world at large (and, thus, the trend in the dollar) remains basically what it was at the beginning of the year; that the U.S. economy’s relative strength will make for a higher dollar and, thus, a plunging gold price, etc. going forward (it was very much a minority call at the beginning of the year).

Q2 Top and Bottom Lines Coming In Strong, However....

In this week's weekly message we shared our view that earnings guidance was about take a hit, and explained why:

My Two Cents On Today's GDP Number

We said the other day:

"....we expect this week’s Q2 U.S. GDP report to come in at the high-end of expectations, and, thus, there’ll be the attendant “we-told-you-sos” and “see-we-know-what-we’re-doings” coming from White House officials – which, by the way, would be deserved self-pats on the back, given the justifiable optimism spawned over tax cuts and deregulation!

Housing Woes Still Appear To Be More About Supply Than They Do Demand

Monthly new homes sales reported this week missed estimates big time, down 6.1% over the past three months, although they're still up 2.4% year-over-year. 

Protectionism's Silver Lining

If there's a silver lining to the protectionist dark cloud hanging over the global economy (and markets), it's that folks are now witnessing (learning) firsthand the below the surface reality that protectionism can hit the perpetrator just as hard (if not harder) than the target(s). 

Quote of the Day: Tariffs Undermining GM On Every Front!

Sorry to hammer the point home so often (btw: I did it every bit as much, if not more, during the last administration). Just can't help it!

While, as virtually every economist who's not politically captured will attest, protectionism has always been one of the most pernicious big-government endeavors (depression-era tariffs were an absolute economic disaster!), given the dynamics of the 21st Century U.S. economy it's more destructive now than ever.

Chart of the Day: Financials Looking Up?

We came into the year bullish on financials and cautious (but certainly not bearish) on tech. 

So What Happens When A Politician Meddles With a Central Bank?

So what stands to happen when a politician meddles with his nation's central bank? Well, Turkey is providing us with a 21st Century test case.

From The Economist this morning:

Quote of the Day: U.S. Stocks Get A Chunk of The Money You Spend on Foreign Stuff -- And -- Maybe Let's Not "Level the Playing Field"

While my experience doesn't entirely agree with Bloomberg's analysts' statement that a rising dollar is necessarily a net positive for stocks (the 20-yr monthly correlation is actually negative) -- although there have absolutely have been periods when it appears as such -- the point that equities receive foreign capital flows is, sadly, a seldom-spoken irrefutably inevitable benefit of trade.

Bull Market Consolidation Or Harbinger Of The Next Bear Market? (video)

In this morning's written commentary I suggested that 2018's stock market action so far looks more like a consolidation in an ongoing bull market than it does the beginning of the next big downturn. Here's more support for that notion:

This Week's Message: The Setup's Fine, but less so than at the beginning of the year...

Long-term technical trends and macro conditions at this juncture have 2018’s market action looking more like a consolidation within an ongoing bull market than it does the saw tooth pattern that often precedes a looming bear market. The still generally strong macro setup explains how – as evidenced by a flat NYSE Composite Index on the year – equities have been able to buck the extreme headwind of rising protectionism.

If You're Truly Interested In Understanding Global Trade

If you're truly interested in getting your head around the trade issue, and if you're willing to set your politics aside (trust me, my views here have zero to do with my politics! [more on that below]), take a few minutes and watch the President in an interview aired this week on CNBC. Then read my "A Consumer and An Economist Talk Protectionism". Then watch one of history's great, and purely objective, economists, Milton Friedman, on the topic. Then, lastly, take in the whiteboard lesson that I produced back when President Obama was going after our trading partners (as I recall, some of my friends on the left didn't seem to appreciate my lesson back then any more than some of my friends on the right appreciate my criticism of the same sort of shenanigans going on today):

Update On China/Africa Relations

In Where Do We Go From Here I wrote:

While chatting with a well-traveled friend the other day she expressed how amazed she is by all of the Chinese investment she's seeing in Africa. "China is pouring money into Africa", I believe is how she put it. So what does that mean? Well, it means China is investing heavily outside its borders, which to some degree involves offshoring manufacturing to Africa (and other places); which means Africa (and other emerging countries) are picking up the manufacturing mantle as China moves further toward a services-oriented economy (like ours), while taking full advantage of the cheap labor and natural resources the developing world has to offer. 

Today's Data Support Yesterday's Message On Housing, And An Important Note Regarding the Fed

Yesterday we reported on weak data from the housing market and suggested that -- while we are indeed taking note -- factors other than waning demand may be the culprits.

This morning's data releases support that notion:

Housing Headwinds

While June's homebuilder sentiment survey (released yesterday) was just fine with an overall score of 68 (above 50 denotes optimism), last month's housing starts and permits results (released this morning) were anything but!

Trade Deals Going On Everywhere! Well, almost everywhere...

Ironically, the threat of a global trade war is inspiring trade deals across the globe. Sadly, however, the traditional U.S. leadership in such agreements is missing.

Headlines of the Day: The Consumer's Still In Very Good Shape

The following headlines from this morning speak to what we're seeing in the consumer components of our macro index:

The Markets Hold Great Sway Over the Political Powers That Be

We've maintained that the saving grace for the market when it comes to the threat of a global trade war is the market itself.

This morning's news with regard to oil makes our case. Here's the headline:

Oil Falls 3%, Below $69, As Treasury Says Importers May Get Leeway to Buy Iranian Crude, Despite Sanctions

This Week's Message: General Setup Remains Constructive, But There's Undue Risk Resulting From Trade Disputes

The following are highlights from our weekly market and economic analyses:

Technicals:

The overall short/intermediate-term setup remained mostly unchanged last week across the cyclical sectors. The one exception was energy recapturing its 50-day moving average. Financials, industrials and materials continue to score poorly, while tech, consumer discretionary and now energy receive the highest possible scores.

The Two Forces Changing Everyday Life for the Better!

I'm always a bit perplexed when I hear folks lament the ills of modern society. They tell tales of a hollowed out middle class and of increased poverty at home and abroad. All the while I know that they, in their own communities, see what I see as I meander along the trails in my own neck of the woods; which vividly illustrate for me that while life in 21st Century America ain't perfect, it certainly ain't all that bad either. 

Unfortunate Headline of the Day -- Or -- The Stifling of Stagnation

The headline reads:

China's Trade Surplus With the US Grew In June

Yep, that's an unfortunate headline indeed! Unfortunate in its wording, that is.

No News Is Good News....

In this week's video I suggested that the recent rally at that point  looked to me like a "no-news-is-good-news" event. I.e., amid a bullish setup, any lull in THE headwind (trade war) would see prices higher. I also cautioned viewers to expect "more volatility because, clearly, neither side is willing to concede at this point." Then of course that evening (Tuesday) the Administration laid out its plan to tariff another $200 billion worth of Chinese imports and, of course, yesterday saw the Dow down 200 points. 

Stat of the Day: Good Inflation

Yesterday we described the circumstances under which inflation can be considered a good thing:

Stat of the Day: Good and Bad Inflation

Inflation can be a good thing, when the timing's right. In fact, it's what the Fed has been trying to create (to the tune of 2% annually) ever since the 2008 recession.

Copper's Catching a Cold

We were more than clear from the get go that if President Trump was to act on the promises of Candidate Trump, the bad (protectionism) would pose a major headwind for the good (tax reform, deregulation, infrastructure) when we're talking the markets and the economy.

Aside from the equity market serving up a pancake during the first half of a year when the setup coming in was better than the previous year (which happened to be a very good year for stocks and the economy), there's no more vivid a validation of our concern than the present state of the copper market.

Present State of the Market: Remains a Correction in an Ongoing Bull Market (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Quote of the Day: Latest Data Deserve A Bit of Skepticism

Last week we cautioned that the threat of a trade war could be skewing the latest data a bit positive:

This Week's Message: General Conditions Don't 'Yet' Justify The Recent Rotation To Defensives

The following is my summary of our weekly market analysis:

Last week showed some very short-term technical improvement – my subjective view in “daily chart character” -- virtually across the board. The binary (objective) technical analyses showed improvement in transportation stocks (recaptured their 200-day moving average), in home builders (recaptured their 50-day moving average) and in the positioning of the 50, 100 and 200-day moving averages for healthcare.

The S&P 500 Index itself continues to exhibit strong technical trends. The message being: probabilities suggest that the bull market has significant room to run, once it completes what, at this point, appears to be healthy consolidation.

Where Do We Go From Here?

In conversations with friends and clients (also friends), I hear over and over again how they (many of them) are concerned about the latest on foreign trade, but that they appreciate that something is finally getting done to "level the playing field."

What that tells me is that many folks -- given that they have lives -- either haven't had the time or desire to really dig into the issue, and/or they don't fully grasp it, and/or the sources where they dig offer up biased depictions of the present state of affairs.

While our primary purpose herein is to keep clients abreast of the whys and wherefores of how we manage their money, we also feel compelled to offer up some clarity on economic-related waters that politicians and the media are so adept at muddying up.

The one thing we can promise is that there'll be no politics in our depictions. Our ultimate aim is to forever see, and present to our subscribers, the world as it is, not how we or they may like it to be.

Where Do We Go From Here?

As you know, the first shots have been fired in what we can legitimately call a trade "battle"; call it a border skirmish, maybe. Whether or not it escalates to all-out war remains to be seen.

In the Face of a Looming Trade War

To give you a feel for what's inspiring today's action, here's this morning's entry to our internal market log:

A Very Brief Reprieve?

Here's what has the market jumping this morning (Dow futures point to a 200-point surge at the open):

No Mystery What's Troubling the Market (podcast)

HAPPY 4TH OF JULY!!
 

This Week's Message: Technicals Mixed, Fundamentals Strong, However.......

We'll make this week's main message short and sweet (or sour, given our take on recent developments) by sharing my weekend entry to our internal market log. There'll be much more to come herein over the next few days: