Monday, November 2, 2020

Morning Note: Entering New Territory

October Purchasing Managers Indices (PMI) were released last evening for much of the world, and, per much of the world scoring above 50, much of the world's economy improved (vs September) last month. That, I suspect, plus -- in the face of covid lockdowns and a contentious U.S. election -- some dip-buying following the worst week since March for global stock markets has stocks in rally mode this morning.

In Saturday's video commentary I expressed some skepticism over the legitimacy of China's latest data -- not that they're not ramping up notably, it's just that manufacturing for the sake of manufacturing numbers alone (read bulging inventories) is not (so much) cause for celebration -- and, sure enough, its export numbers left much to be desired. 

Asian equities rose overnight, with 12 of the 16 markets we track closing in the green. Europe's up nicely across the board (all 19 bourses we follow trading higher this morning) and U.S. stocks are screaming higher as I type: Dow up 432 points (+1.63%), S&P 500 up 1.34%, Nasdaq up 0.84%, Russell 2000 up 1.65%.

The VIX (S&P 500 implied volatility) is down -2.00%, still at a fasten-your-seatbelts 37.28. VXN (Nasdaq vol) is down -2.28%.

Oil futures up 0.56%, gold's up 0.66%, silver's up 0.91%, copper futures are up 0.57% and the ag complex is down -0.21%.

The 10-year treasury is, interestingly, given the rally in stocks, catching a very nice bid (yield notably lower) and the dollar is up 0.17%.

Our core portfolio, led by materials, industrials, financials, energy and banks is up 0.85% so far this morning. The yen and ag commodities being the only drags at the moment.

Economist Peter Boockvar echoed to a tee this morning our latest messaging herein on the efficacy (lack thereof) of Fed policy and the prospects for inflation from here on out:   emphasis mine...
"...tax, spending and regulatory policy that either President employs will have an outsized economic and market outcome because any mistakes won’t be able to be mitigated by Fed policy and with respect to inflation, could be exaggerated by them. Bottom line, we are entering new territory with monetary policy and its side effects and fiscal policy both expansive (spending and/or tax cuts) and restrictive (slower rate of spending and/or tax increases) will have an outsized impact with the direction of inflation being a byproduct."
Have a great day!
Marty

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