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December 4, 2018

Yield Curve Flattens to Levels Not Seen in a Decade

 

Yield Curve Reaches Flattest Level Since 2007

Interest rates had an extremely volatile day, the yield on the 10 year Treasury note falling 5 basis points. Meanwhile, the short end of the US swap curve actually inverted, with 2 year swap rates sitting a mere 2 basis points below 10 year rates. Some market pundits pointed to concerns around trade conflict, still others pointed to a rotation out of equity prices where valuations are stretched. Whatever the reason, an inverted yield curve is one of the market’s favorite leading indicators of a recession,...

December 3, 2018

Trade Truce Pushes Equities, Crude Higher

 

US-China Trade Truce Leads to Equities Rebound

The announcement of a 90-day truce in the trade war between the US and China over the weekend unsurprisingly led to a global equity market rally today. The CSI 300 index of major Chinese stocks closed up 2.8% while the S&P 500 closed up 1.09%. The “truce” may be short-lived though - no actual deal has been reached, and President Trump’s appointment of Robert Lighthizer (a China hard-liner) to lead negotiations could foretell a protracted battle over the terms of a new actual trade deal.

 

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November 30, 2018

G20 Summit Begins After Days of Speculation

 

Market Action Muted as G20 Summit Begins

Market pundits were speculating today that President Donald Trump and Chinese President Xi Jinping could agree on a framework to move trade negotiations forward during this weekend’s G20 summit. The proposed negotiation framework would pause any additional tariffs while the world’s two leading economies negotiate trade terms. Such an agreement would mean a significant rally in risk assets, but despite an absence of any official announcement, equity markets still grinded higher, with the S&P 500 and Dow Jones...

November 29, 2018

Economic Uncertainty Builds as Consumer Spending Rises, Inflation Cools

 

Equities Move Sideways, Volatility Remains High

Investors continued to digest a whirlwind of trade and geopolitical headlines during today’s volatile session. President Trump cancelled his meeting with Vladimir Putin at the G20 summit after Russian forces seized 24 Ukrainian sailors off the coast of Crimea.  Speculation also increased that a trade deal may soon be reached between the U.S. and China, but we’ll have to wait until at least the dinner between President Trump and Chinese President Xi Jingping tomorrow night.  While equity markets didn’t react...

November 28, 2018

Commentary on "Neutral Rate" Rattles Financial Markets

 

Powell Comments Push Risk Assets Higher, Rates Lower

Federal Reserve Chairman Jerome Powell’s comments that rates are “just below the neutral range” led to an equity rally (S&P +2.30%) as investors interpreted that to mean that the Federal Reserve will slow their rate of hikes in 2019. In spite of his comments, and the market reaction, Chairman Powell still emphasized that US monetary policy is not on a “preset” path- yet another reminder that predicting rate hikes far into 2019 could be quite challenging. Near-term, the market continues to price in an...

November 27, 2018

Risk Assets Rally Despite Geopolitical, Fed Uncertainty

 

Fed Sees Inflation Below Target, Increasing Uncertainty on Rate Hikes

The uncertainty about the pace of rate hikes next year remains after Federal Reserve Vice Chairman Richard Clarida suggested today that inflation may be running below the Fed’s target. The Vice Chair’s comments reveal the Federal Reserve’s desire to remain data dependent and non-committal as to future hikes, and signal a renewed effort to ween markets off the “forward guidance” that previous Fed leadership used to telegraph policy decisions. This apparent new Fed stance is likely to keep...

November 26, 2018

Retailers Rise as Holiday Season Kicks Off

 

Risk Assets Bounce Back, Unconvincingly

With record sales expected to be reported to have taken place on Black Friday and Cyber Monday, retailers led the move up for both the S&P 500 (+1.55%) and the Dow Jones Industrial Average (+1.46%), while tech shares rebounded from last week’s plunge and assisted in leading the Nasdaq +2.06%.  The price action came on below-average volume however, with the S&P trading 18% fewer shares today than average - signaling this may be a weak rally after a prolonged stretch of negative days.  Treasury yields/swap rates...

November 23, 2018

Market Pessimism Outweighs Black Friday Exuberance

 

The Slippery Slope for Crude​

There was no holiday spirit to be felt in energy markets...

November 21, 2018

Risk Assets Gobble Up Gains Heading into Thanksgiving

 

Equities Rebound Heading into Holiday

Stocks markets had something extra to be thankful for as they bounced back from the basting they had endured over the past few sessions, with the tech-heavy Nasdaq leading the way with a 0.92% rise while the S&P 500 (+0.31%) posted a more modest gain.  The risk-on sentiment endured a weak business investment report from the Commerce Department which displayed durable goods orders declining 4.4% in October- its largest drop since July 2017.  Also adding to the growing list of fundamental economic indicators that...

November 20, 2018

Risk Assets Continue to Feel the Pain

 

Tech Stocks Pull S&P 500 into Negative Territory on the Year

The S&P 500 was down over 1% at the open and kept grinding lower- ending the day down 1.82%. The sell-off was led by technology stocks, echoing the theme of the past few sessions. Unlike last week, the VIX or “Fear Gauge” did respond to the move in cash equity markets, moving up 2.5 points to 22.72- its highest close of the month.  The VIX has now spent three and a half months above 16 in 2018, after momentarily peaking at that level in 2017.

 

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