Wkly Market Round-Up thru Oct 12th 2018; Goldilocks and the 3 Bears!

 Weekly Updates  Comments Off on Wkly Market Round-Up thru Oct 12th 2018; Goldilocks and the 3 Bears!
Oct 132018
 

Hey everyone, this market reminds me of Goldilocks and the 3 Bears. How many of you remember that story? Well check out my Weekly Round-Up this week to get a glimpse into what is going on in the current markets.

• Q3 Earnings expected to come in at 21% YoY growth which follows 24% / 26% for Q1/Q2 this year…Underlying growth is expected to slow its ascent but to a still strong 12%…rising rates could further dampen and compress margins/EPS… So far JPM fell 1.1%, C was up 2.1% and WFC up 1.3%…
• It is now all about Interest Rates – Goldilocks and not 1 but 3 Bears! (Rising Rates – Trade Tariffs – Regime change – Deflation to Inflationary markets…since the dot com bust thru the financial crisis in 2008 stocks and bonds have been inversely correlated…this happens in a deflationary environment – now as the markets shift more towards an inflationary one, this correlation could change – this would change investment models of most all pension and endowment/retirement funds…we saw some of this in Q1 of 2018 when both Bonds and Equities had a down 1st Qtr…
• Both the Dow and the S&P have fallen for three straight weeks, while the Nasdaq has dropped for two… For Q3 Earnings analysts are looking for earnings growth of about 19% and sales growth of 7%. There are also concerns that expectations have gotten too optimistic, or that the quarter could represent peak earnings, as much of the earnings growth can be credited to the tax bill passed late in 2017…
• This past Thursday’s downdraft was marked by the 4th volume, with 11.3 billion shares changing hands, since Feb. 9, amid a sizable sell order around 2:30 p.m. that added to the downswing and had traders buzzing…the Dow lost 300 points between 2:30 and 2:45 on that larger order distribution…
• When the large-cap index drops 5% or more during the first 10 trading days of a quarter, it falls 79% of the time for an average quarterly decline of 11.3%, according to the Dow Jones Data Group…Since 1928, the S&P 500 has logged a 5% decline about every two months and a 10% drop every six months…On average the S&P 500 has experienced intra-year declines of almost 14% since 1980 despite going on to post annual gains in over 75% of those 38 years
• Oct is a strange month for the US Financial markets…it is also generally the last month of the year that Mutual Funds can sell their losing stock positions to off set gains in their portfolio for tax reasons…

Get my take on this week’s Weekly Round-Up:

 

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb

Wkly Market Round-Up thru Oct 5th 2018: Don’t Look Down!

 Weekly Updates  Comments Off on Wkly Market Round-Up thru Oct 5th 2018: Don’t Look Down!
Oct 072018
 

Hey Everyone, this week’s kick off of the fourth Quarter was like a carnival ride! As I always tell our members in our User Group, we must watch the Bond Markets and interest rates. We have a number of events coming up over the next 12 months that will change the “go-forward” dynamics of the US Equity Markets. At the same time we see the FEDs reducing our Balance Sheets to the tune of 50 Billion per month, we’re also seeing the Corporate Bond markets growing to very large levels. In fact, over the next 3 years we will see over 6 Trillion of the “BBB” lower end investment grade bonds come up for refinancing. And in a raising interest rate market it will be most interesting. Of course there are other issues the Equity Market must face in the coming few years so get my take in this week’s Weekly Round-up:

 

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb

Wkly Round-Up thru Sept 28th 2018; Sugar High?

 Weekly Updates  Comments Off on Wkly Round-Up thru Sept 28th 2018; Sugar High?
Sep 302018
 

Hey Folks, we round out Q3 with a strong quarterly showing of the DOW and other indexes. We finish the week slightly down in most US Indexes but even with a Fed Rate hike of 25 bps and fear of higher interest rates to come, the US Economy is showing amazing strength.

Here are more market Sound Bites:

• During the first half of 2018 4 top equity performers, AMZN, MSFT, AAPL & NFLX were responsible for 84% of the S&P 500 Returns…And after the latest Fed interest rate hike of 25 bps the FEDs have now raised rates by 2% since the end of 2015 and has shrunk the US Balance Sheet by about 6% since moving from QE to QE…the FEDs latest outlook suggests the growth will slow in 2019 and 2020..
• And we have Italy which rattled the markets a bit by developing a budget to kept the deficit under 2%; instead it is set to rise to 2.4%…driving Italian Bond yields higher…the contagion risk has risen some…
• Bets are now being placed on the mid-term elections with the Democrats so far showing about a 75% change of regaining the House and almost a 50% chance of retaking the Senate….should the Democrats win for traders a good play would be in infrastructure stocks…but a blue wave win for the Dems would be not as good for the markets…what has led the markets thus far have been tax reform, less regulation and increased defense spending…this could be put in jeopardy and the markets will need to adjust its thinking…interest rate sensitive sectors such as Utilities, Consumer Staples and real estate could possibly do better if the Dems are in control vs Repubs…
• Fixed income securities are overpriced in most developed economies (yields are too low) so there is a desire to provide more stimulus in those countries to spur stronger growth…currently most international investors are comfortable owning US dollar denominated securities…37% US Treasuries are owned by non US and about 29% of Corp Bonds…
• The USD and the markets have begun pricing in a resolution to the Trade Tiff between the US and China with a view towards the mid-term elections…small cap stocks have been underperforming while emerging markets are consolidating and the USD as pulled back from 2018 highs…
• Oil is on the rise with Brent climbing above $80 per barrel and WTI moving over $70…We believe the spread between Brent and WTI will widen as we move towards the Fuel embargo date of Nov 4th with Iran…

Now, get my take on the current market price action.

 

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb

Wkly Round-Up thru Sept 21st 2018; All Aboard!!

 Weekly Updates  Comments Off on Wkly Round-Up thru Sept 21st 2018; All Aboard!!
Sep 222018
 

Hey Everyone, giddy up!

• The DOW finally caught up with rest of US Indexes eclipsing Jan highs to set new All Time highs this week…and the markets are not listening nor seemed to ignore any Trade Issues with China…we also saw this week Emerging Markets coming off 2018 low’s led by China’s large 4%+ moves higher this week…and this of course was led by a weaker US Dollar Index as Emerging Market currencies moved higher…
• So far this year, US Corp have repatriated over $225 Billion in Q1 and over $105 Billion in Q2 with an estimated $170 Billion more to go…most of this money has moved into dividends, stock buy backs and debt reduction…
• Fed Policy Makers to raise rates another 25 bps next week (Sept 26th) and the view is again this Dec 19th we’ll see another 25 bps rate hike…but almost all of this has been factored into the current price action…what all will be watching is “where to from here”…in trying to analyze where is the “fair normalized interest rate we’re seeing economists come up with the R* (R Star) which is the Real Feds Funds neutral rate…which means how much will interest rates rise over current inflation rates…and according to the current interest rates of 1.75% to 2.00% and the current inflation rate around 2% shows we are about flat to slightly negative…this suggests a few more rate hikes…this will imply about 4 more rate hikes to keep the R* in agreement with the projected inflation rate…If inflation gets out of control this could be the biggest fear for Global Markets…the threat of a Trade War reversal could ignite Global inflation…Globalization pushed manufacturing to the cheapest economies, mostly China…
• Also the FEDs will be increasing the amount they will be withdrawing from the US Balance Sheet each month from a current $40 Billion per month to $50 Billion monthly starting Oct 1st…The ECB will be starting to withdraw from its Balance Sheet in Q4 and combined the Global Central Banks are pumping over $500 Billion per month into the Global Financial System where most of this will start coming off next year…
• Should we disengage from China? – The simplest view is yes we should; we are only doing what China has been doing for the past decade; –China has been reducing it’s reliance on imports as it attempts to grow its middle class (“Made in China 2025”) and be less import dependent upon key country assets like computer chips and other technology…so using the same logic China has been doing for the past decade makes sense…Currently the US is self sufficient in most domestic needs like food and energy and technology but has become increasingly dependent upon China such as electrical and optical equipment and manufacturing in general…
• Are Pot Stocks the New Bit Coin? We saw Tilray go bat shit crazy last week where investors rushed to jump into the stock and with limited float (10% available to trade), the shares moved around like a squirrel crossing a 5 lane highway…

Get my take on this week’s markets in our Weekly Round-Up

 

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb

Wkly Market Round-Up thru Sept 15th 2018; Wolf of Wall Street

 Weekly Updates  Comments Off on Wkly Market Round-Up thru Sept 15th 2018; Wolf of Wall Street
Sep 162018
 

Well, the Wolves will begin to howl in the coming months! Is that a good thing or a bad thing? Well, it depends; –wolves howl when calling for the pack to come together, when they are hungry and when they are ready to hunt! So is howling a good thing or a bad thing? We have a lot of geopolitical risks laying in wait mostly in Asian Pacific and Emerging Markets but thus far it is not affected US markets. We have seen a large divergence in the Global Economy vs the US Markets. I believe it is unsustainable and will most likely move back towards more established levels. Get my take in this week’s Weekly Round-Up

 

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb

Wkly Market Round-Up thru Sept 7th 2018; Trouble Everywhere but Here

 Weekly Updates  Comments Off on Wkly Market Round-Up thru Sept 7th 2018; Trouble Everywhere but Here
Sep 082018
 

Hey Folks, it seems in this holiday shortened week Global Indexes are having performance anxieties! And even though we saw red candles each day to kick off the month of Sept, the US markets are one of the best global performing markets. Here are some of my other thoughts…

• S&P up 5 months in a row and first 4 trading days in Sept saw red each day…as the calendar shifts from August to September, so will market themes and moods. Positioning over the last week continued to see emerging market pain and the culmination of the crisis in Argentina with the ARS off 25% and rates rising to 60% despite IMF aid plans. This typified the summer. Emerging markets suffer from idiosyncratic stories – from South African capital flight linked to government policies – land reform and new corporate structures, to Turkey and its ongoing battle with the US…Brazil Political issues…Sept usually brings with it higher Volatility and Index under performance…

• Since the US FED begin QE equity values post 2009 have risen by 27.8 Trillion (337%) and the combined balance sheets of the FED, ECB and BOJ moved from about $4 Trillion to about $15 Trillion which closely parallels the S&P Growth…As the FEDs now are removing monies from the Balance Sheet pains are emerging from Emerging Markets to start (Turkey, Argentina & South Africa)…Italy could also be the potential undoing of Europe with their massive Bond Debt…US Corporations have also taken on loads of Debt to sell over $9.2 Trillion Bonds and are now on record to see over $850 Billion in Stock Buybacks…and let’s not forget about the Public Retirement Funds trying to maintain their assumed annualized returns of 7.6% by moving into additional asset classes like Private Equity…and Pension Funds have over $4 Trillion in unfunded liabilities that dwarfs the $500 Billion in underwater housing that help set off the great financial recession in 2007-09…

• The shift from Active to Passive Index funds can also cause issues in our next downturn as well..

 

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb