Market Commentary

» Posted by on Apr 3, 2019 in Announcements, Shop Talk, Uncategorized | 0 comments

Stocks are higher this morning as the market responds to positive talks surrounding Chinese trade.

Top U.S. trade representative Robert Lighthizer and Treasury Secretary Steven Munchin are meeting in Washington today with Chinese Vice Premier Liu and a delegation of representatives from China. Bulls are pointing to the fact we are another step closer to a resolution, still hoping President Trump and Xi could get together in May or perhaps earlier to iron out the final wrinkles and sign an official agreed upon deal.

The S&P 500 has bounced back by nearly +22% from the December low, is currently trading at six-month highs and only bout -2% below all-time record highs set back in September of last year. There seems to be more signs that the global economies aren’t going to fall off a cliff, more signs that a trade deal is probably going to get done between the world top two economies, and a much more dovish Fed that probably doesn’t hike rates anytime soon.

As for the 10-year Treasury, it went from a high of 2.79% back in January to a low of 2.37% by late-March. It’s now back to 2.47%, and seems somewhat supportive of equity valuations.

Volume on U.S. exchanges was fairly light yesterday at just under 6.5 billion shares, compared to the almost 7.5 billion shares we’ve been averaging the past several weeks.

There’s just not much in the way of traditional economic news until Friday’s employment numbers. Don’t forget, we start the Q1 corporate earnings season the following Friday, when the big banks are scheduled to release Q1 estimates.

Bears are starting to make more noise about the recent selloff in Lyft share, which was the most hyped IPO since Facebook, and also a bit concerning for the bulls. There’s some talk circulating inside the trade that if we were to see more of a major selloff in the Lyft stock price it could spill over and spook some of the larger bulls currently in the market and perhaps spark a stampede to the downside.

On the flip side, bulls are pointing to an extremely positive technical signal, “a golden cross,” where the S&P 500s 50-day moving average crosses above its 200-day moving average, indicating a positive change in trend.

Technical guru’s are saying the last time this formation occurred was back in mid-2016, and the S&P 500 rallied roughly +15% during the next 12-months, which would place the market up near the 3,300 level.

I’m not saying an extreme melt-up can’t happen, but talk much beyond 3,100 starts to get very hard to believe, especially if the Fed decides to move back to a slightly more neutral to hawkish stance. I’m sticking with my same game-plan and trimming positions and banking profits into the rallies.

As always, timing is everything…

Economics Involved with Closing the Southern Border: Although Mexico is popularly known as the main U.S. source for avocados and tequila, the huge amount of products it sends to its northern neighbor each year touch almost every major segment of America’s economy. The U.S. imports enormous quantities of autos and parts, computer equipment, oil and gas, appliances and plastic and rubber products — not to mention fruits and vegetables such as tomatoes, berries and melons. Mexican imports in 2018 hit a record $347 billion, most of which entered by truck or train at key junctures along the nearly 2,000-mile long border. Every day thousands of trucks and rail cars cross from one country to the other. President Trump acknowledged that a border freeze could hurt. “Sure, it’s going to have a negative impact on the economy,” he told reporters at the White House. “But security is what is most important.” I’m told top White House economic adviser Larry Kudlow told CNBC on Tuesday afternoon the administration was looking at keeping busy road and rail junctures open to limit the economic damage if the U.S. takes action. Keep in mind, Mexico is also the second-largest market for American exports as the U.S. shipped a record $265 billion worth of goods to its southern neighbor last year. (Market Watch)

 

 

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