Monday, April 1, 2019

Today's Log Entries


Per yesterday's entry, futures are pointing to a sharp spike higher at the open this morning (spx +20). Given ample liquidity and ho-hum sentiment readings, there’s the potential for sustainable upside from here. Although there are definitely risks looming that could limit the gains, if not see stocks lower: The biggest being trade talks, next being Brexit and U.S. data.

Retail sales came out this morning with a big miss for Feb, but Jan revised higher; futures barely blinked. ISM at 7am will be the next one to watch this morning.

European PMIs were released last night and with the exception of Spain and Great Britain (go figure), they were notably disappointing. Nonetheless, EUR/USD is higher this morning and European cyclical stocks are rallying hard; speaks to current optimism that the global economy’s woes are simply a soft patch. Asia PMIs came in generally strong, much better looking than Europe’s. 


Equities, the world over, rallied hard today. Clearly, recently waning optimism and rising cash on the sidelines set the stage for a sharp fear-of-losing-out rally on positive Chinese data, optimism over trade talks, and, despite today’s across the board no votes on all proposals, optimism that Brexit will ultimately occur with a workable UK/EU trade deal attached. A better than expected U.S. Manufacturing ISM report certainly didn’t hurt either.

I believe the Brexit optimism is well-conceived. The optimism over China trade talks is somewhat less justified at present. A strongly bullish outcome for the latter requires a deal that removes tit-for-tat tariffs and doesn’t provide a segue to a trade war with Europe; neither condition is at all a certainty at this point.

Financials led the way today, which is consistent with our current narrative: I.e., evidence that the global economy is not ready to roll over will bode well for what has been an unjustly unloved sector in my view.

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