This Morning's Log Entry

As you've noticed, I've gotten into the habit of often sharing my internal log entries herein. Feedback from clients suggests that there's a demand for these high-frequency daily musings. While, given that demand, I'll continue to offer up commentary that I believe will help readers keep the short-term in perspective, a word of caution: My sharing, as I do this morning, of a short-term hypothesis is absolutely not to be considered a prediction nor trading advice to our readers! Make no mistake, the secret to long-term success for 99% of investors, is, in our view, to understand the macro and to catch the major, long-term market moves, while not attempting to time the short-term fluctuations. 

Think of these log entries, as well as the videos, as simply my attempts to help you understand what's going on in the markets and, most importantly, to help you keep your heads about you amid the constant media onslaught. 


3/31/19 Sunday Morning

China’s manufacturing PMI came in well above expectations yesterday (services beat as well, but the world is focused primarily on manuf), which offers evidence that the global slowdown may be bottoming. Other global data, while very mixed, has me leaning toward that hypothesis as well.

Chart of the Day

To help you appreciate our focus herein of late on trade negotiations, and Brexit -- and to set your expectations for lots of volatility over the next few weeks (in both directions) -- here's a look at Thursday's (White House econ adviser L. Kudlow's comment) and Friday's (Teresa May's Brexit plan voted down, again) action in the U.S. equity market:

Green arrows highlight strong gaps higher at the opens (btw, tough to write with a mouse).... click to enlarge...

Quotes of the Day

While I've disagreed plenty with Mark Zandi, Moody's chief economist, over the years, I strongly believe (as I've preached herein and in client meetings an nauseam) that he's spot on when it comes to the economic and political consequences of not soon settling the trade war with China.

Positive Headline and Quote of the Day

While the market gave back some on the news highlighted below this morning, make no mistake, if Mr. Qaurles is correct in his assessment, this is unequivocally good news:

This Morning's Log Entry -- And -- This Week’s Message: Mixed Picture

Chinese stocks screamed higher last night on news that trade talks with the U.S. were constructive, as China pledged greater than previously-proposed measures related to IP theft and forced technology transfer.

This Morning's Log Entry

The market is basically directionless at the moment, with the S&P trading within a range from 2780 to 2820.

Brief Commentary on General Conditions, Present Risks, and the Current Market Setup (video)

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Quote of the Day

Bloomberg's Andrew Mayeda shares my view of the extreme political risk in not coming to workable terms with China, and speaks to the market risk inherent in a deal that does not include a rollback of existing tariffs:   emphasis mine...

This Morning's Log Entry

Equity futures are pointing to a strong open this morning. To the extent that the yield curve inversion drove stocks lower on Friday, it would make sense that traders would either, 1, rotate back into stocks as they get their heads around the historical average length of time between inversion and recession (18 months) -- when, that is, an inversion presages a recession, or, 2, chalk it up to the yc inversion exacerbating already palpable global angst over the prospects for a protracted trade war (drawing in Europe) amid slowing, but not on balance recessionary, global economic conditions, and, thus, take the buying opportunity Friday offered up – as the consensus base case is that trade tensions will abate markedly over the next few weeks. Plus, and this is a huge plus!, central banks en masse are currently efforting mightily to maintain easy monetary conditions.

A Further Selloff Is Not To Be Bemoaned

Last Friday's blog post was subtitled "We Need A Selloff Right Here". My premise was that a strong stock market at this juncture was counterproductive to ultimately positive results around what I view as the market's greatest current headwind, the U.S./China trade war.

Our Current Thinking On Financials and Industrials

Our updated narrative on two troubled sectors, financials and industrials:

This Week's Message: Scary Yield Curve, Scared German Manufacturers, and What's Really Troubling the Market...

The consensus among financial pundits is that yesterday's global stock market drubbing was catalyzed by the inversion of the Fed's favored yield curve signal; the 3-mo/10-yr treasury yield curve.

Perspective On Today's Selloff (video)

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This Morning's Log Entry: We need a selloff right here!

Wednesday’s rally on the Fed decision, then the plummet immediately following Powell’s press conference made perfect sense to me – after hearing Trump proclaim that he has no interest in rolling back tariffs as part of a China deal. Therefore, Thursday’s big rally surprised me – I was absolutely expecting follow through selling.

Still -- for the moment -- Skeptical

This morning's very strong rally is simply that, thus far, very strong. Volume is above average and breadth (advancers vs decliners) is outstanding!

Last Night's Log Entry

Here's an excerpt from last night's log entry. And, per paragraph two, stocks are set to open lower (although could be, or get, worse) this morning:

This evening China is surprisingly (although the Fed announcement was extremely bullish for EM [bearish the dollar]) trading higher, as are SPX futures, although the latter are losing steam at the moment.

Brief Commentary on the Latest Action (video)

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Unfortunate Headline of the Day!

Not the headline the market was looking for!

This Evening's Log Entry

Stocks completely gave up what was an impressive move further above what had been stiff resistance. The selloff was in response to news that Chinese trade negotiators were backing away from what had been pre-commitments on issues around intellectual property. Followup articles reported that China’s threatened reversal is inspired by the U.S. not committing to the rolling back of tariffs introduced by the Trump administration.

Headline of the Day

Stocks, in a virtual instance, gave up the majority of their gains this morning on the following headline:

This Morning's Log Entry

The market is rallying this morning on the latest EU/UK developments virtually assuring a Brexit delay, and on expectations for an un-eventful wrap up tomorrow of this week’s Fed meeting. A rebound in Boeing, as well, is helping the Dow. 

Quote of the Day: Global Trade Not Collapsing Just Yet...

A little good news on the state of global trade, for a change... 

This Morning's Log Entry

My short-term chart character analysis to end last week speaks bullishly about global equities’ prospects in the near-term, but somewhat discriminatorily:

Quote of the Day

The snippet below from Econoday's highlights of today's U.S. Industrial Production report speaks to what we've been preaching herein ad nauseam for the past couple of years: Protectionist policies (read tariffs) -- as I attribute no small measure of the present global slowdown to such -- are unequivocally no way to promote a nation's economy at large, let alone even the sector(s) such acts are ostensibly designed to protect:  emphasis mine...

This Week's Message: Encouraging Breadth (video)

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This Morning's Log Entry

Clearly, Trump is bothered by pundits in the media suggesting that he’s desperate for a China trade deal. Thus, he’s pushing back with statements that he’s “in no hurry”, that he “could walk away”, and so on. Additionally, the latest stock market strength, he believes, gives him that prerogative.

Today's Log Entry

I need to preface this one with a huge caveat: While it might appear that I am making a prediction in today's entry to our internal market log, that's not how I view it. Instead, my current (always subject to change) "6-month thesis" (abbreviated version below) is simply the laying out of my current (always subject to change) base case.

Brief Commentary on the Latest Action (video)

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This Morning's Log Entry

3/8/19

China’s trade activity has plummeted, relative to expectations, European growth has been subdued and the U.S. is clearly showing cracks; virtually all of it related to slowing global trade, and the uncertainty/fear that it engenders.

Brief Commentary on the Latest Action (video)

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This Morning's Log Entry/This Week's Message: It's All About U.S.-Messaging On Trade!

China continued its strong rally overnight while U.S. equities remain in apparent consolidation mode below 2800 on the S&P 500 and above its 200-day moving average.

Long-term Signal Encouraging (video)

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This Morning's Log Entry

Chinese equities bucked the trend last night by not following Wall Street’s lead lower; the Shanghai and Shenzhen indexes closed up .9% and 2.2% respectively. New fiscal and monetary stimulus, along with the promise of a trade truce, is inspiring a risk-on mood in China.

Are We Staring Into a Sell-the-News Scenario?

A growing theme among market pundits is that the ending of the U.S./China trade spat is already baked into the stock market; i.e., it's a "sell the news" event. Hence today's selloff.

Waiting for Detail

The S&P's down 32 points as I type, the Dow's off roughly 360; volume's a little below average for this time of day (suggesting there's no panic in this morning's action). Early on we saw both indices nicely higher on news that a trade deal is near. 

This Morning's Log Entry

This week’s important data releases (construction spending, ISM Services, new home sales, Beige Book, jobs, etc.), barring any huge surprise in the jobs number, will be overshadowed by trade headlines. Domestic politics will continue its steady stream of sound bites that have, thus far, been ignored by markets. Asian markets closed higher, although well off of their overnight highs, U.S. equity futures are set to open higher.

Politician Do What Politicians Do, The Unfortunate Headline of the Day, And You're Likely Missing the Point...

Updated Tuesday 3/5/19

Indian Prime Minister Narendra Modi rode to office on the promise of massive economic reform, job creation, and so on. And, yes, a number of measures have indeed moved the needle and inspired a great amount of foreign capital interest in India's huge potential.

Generation Z May Surprise You -- OR -- Is Millennial Socialism a Byproduct of a Strong Economy?

So, do the macroeconomic conditions prevailing during one's upbringing impact one's idea(s) of how things should be?

Recently I offered my two-cents on "millennial socialism", as, apparently, per the polls, a large swath of millennials share "socialist" values. The following, from Visual Capitalist, introduces us to the next generation to enter the fold; Generation Z, those born between 1997 and the early 2010s, who make up 25.9% of the population.

Brief Commentary on the Latest Action (video)

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This Morning's Log Entry

2/29/19 (7:18am)

A 200+ point Dow move on positive trade news and decent overnight data has faded on a weaker than expected ISM Manufacturing survey and a consumer sentiment reading dropping 2 points for February.

This Week's Message: The Fed 'Ultimately' Back In Play Would Be A Good Thing!!

The Caixin Manufacturing PMI for China came in just a shade below 50 last evening, which was a marked improvement over the previous month. Asian equities moved from red to green on the news, rallying hard into the close on that and on positive trade news.

No Worries Over the Housing Market

If you've been worrying about the current state of the housing market, well, you can stop now.

Here's Bespoke Investment Group's summary of yesterday's data release: