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Wkly Round-Up 4/5/2019; Forced Choice!

Hey everyone, with summer fast approaching we are gearing up for an interesting Q1 Earnings Cycle. And combined with a highly likely China Trade Deal we can see most Global markets ready to move!

Market Sound Bites

• This past week we saw Manufacturing pick up in China kicking off the trading week giving the markets a solid boost upward in price action, yet we did see some lag in European Manufacturing, especially in Germany; yet we capped this strong week on Friday with a strong Job Numbers giving just the right mix of low unemployment, wage growth and subdued inflation.

• Since the FEDs have reversed Policies from tightening to accommodating we’ve seen records set across both boundaries; FED Tightening gave us Q4 performance records [drawdowns around 20% across all US Market Indexes] to a very accommodating FED giving us Q1 performance records [best in over a decade with US Index Gains over 15%]…now we are faced with a “what next?” type of quandary…in one corner we have the bullish camp that emphasizes lower inflation, full employment, subdued wage growth; and in the other camp we have credit markets showing higher expectations of a rate cut by the end of 2019 vs a rate hike…Where will this lead? What path will price action follow?

• By June of this year we will see the longest Bull Market run in the history of the US Markets…but this time it is much different than pervious runs…it can all be summed up in accommodation by Central Banks all around the world! In fact, accommodation continues with over $10 Trillion in Government back debt still carrying negative interest rates! So, the outcome of this enormous degree of accommodation and hence, liquidity it still unknown! How, when and where Global Central banks begins to unwind or attempt to unwind their massive balance sheets will be a key to the length and duration of our bullish run in Equities. It can continue to move higher but there are clear systematic risks floating on the horizon. But we’re not there yet!

• Meanwhile, we will be kicking off Q1 Earnings and so far we’ve seen expectation drop to a 4.2% decline Year over Year…and Q2 Earning revisions are being lowered to almost flat in YoY comparisons….where we go from here will depend heavily on the forward guidance we hear in the upcoming Earnings Cycle…and keep in mind the China Trade Deal is all but priced into the current markets…but with the Earnings bar lowered and already priced in we can still see price action advance and continue higher while the FEDs and other Central Banks remain accommodative…

Enjoy this week’s Weekly Round-Up.

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