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.

Sentiment among individual investors and advisors has declined of late and money market fund assets have risen, while the last few days the volume trend shows a bullish underlying lean. This all sets a stage for a potentially sharp short-term rally.

Trade talks will resume in the U.S. this week, and while the U.S.’s stubbornness on existing tariffs is a huge risk, I wonder if the market’s negative reactions thus far to all commentary suggesting such won’t have the topic go mute at least for the next few days? It’ll be interesting to see, as Trump finds it virtually impossible to keep quiet on such topics when asked by the media. If commentary from both sides rings strongly positive this week, it’ll provide a nice tailwind for stocks.

Brexit “positional” votes will be held tomorrow morning to gauge the possibilities for various exit scenarios. At best, since there’s a lot to happen between now and the April 12 deadline, Brexit shocks, if any, will likely be short-lived intraday events this week.

China’s Caixin Manuf PMI will be released today at 5:45pm. A strong reading there will add more fuel to a potential rally in Asia this evening and support an upside U.S. opening tomorrow. A disappointment, unless it’s off-the-charts bad, likely won’t entirely mute Asia’s positive action tonight.

Japan’s Tankan surveys and Manuf PMI, South Korean trade data and Manuf PMI, and Australian business confidence are all due for release today as well. While confirmation among these indicators that China's positive PMI print indeed speaks positively about current global conditions will add fuel to Asian stocks tonight, I suspect expectations remain fairly low at this juncture. Thus, ho-hum readings are unlikely to by themselves thwart any Asian rally. Although big misses would, at a minimum, be felt in currencies, which indeed could impact equity market action this week.

U.S. data will be rich this week and could nudge the market in either direction: Retail sales and the ISMs will be the most telling data for the first half of the week, the employment report on Friday will receive intense focus toward the end. I suspect we'll see an upside tilt to this week's data in the aggregate, which could do a real number on the bond market after its recent huge rally...