Friday, May 15, 2020

Morning Note: Focus On The Right "Why"

The S&P opened lower this morning on what you’d expect from retail sales and industrial production data. Although, as I type it’s staging an impressive rebound; essentially flat at the moment. Futures were off over 1% pre-open on the data and on news that the US plans to ban Huawei from the American chip market and China’s threat to retaliate by way of iconic US brands such as Boeing and Apple.

In other asset class action, silver is seeing an impressive move this morning, +3.8%, with gold, oil and bonds also rising. Copper’s down. Of that mix oil would be the one bucking the economic data.

While weeks-to-months-long bounces off of the initial selloff lows are hallmarks of bear markets/recessions past, it’s always a bit baffling to witness the “market’s” (stock market’s) faith that policymakers can overcome economic gravity. Perhaps this time they can, but it’ll have to come on unlimited and nonstop stimulus as we ride the waves of what’s to come.

If indeed they “succeed”, imagine the other side when they attempt even the tiniest bit of weaning.

In the meantime, we'll continue to do the macro work and invest in a manner consistent with the real-world risk/reward setup.

Here’s the line at the top of my daily macro log:

“Deliberately study the why, the why of each position you’ve taken, as opposed to focusing on the why of its short-term price action.”

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