Flashback To The 70’s
(Click on image to enlarge)
Global equity markets had a moment of self doubt and most country ETFs backed off after digesting lower rates in the US. The thinking behind the tepid market response actually had some logic to it as the Fed stated they wereconcerned about an economic slowdown. Bullish players that were anticipating a de-escalation in the trade war were shocked on Friday as talks between China and the US were cut short, and longs bailed. One exception to the sell off was the jump in Canadian stocks which closed up 1% for the week. Canada benefited from the jump in oil while ignoring Justin Trudeau’s blackface scandal.
We ( Don’t) Work cancelled its IPO and that had an unexpected trickle-down effect. Rumor has it that We Work’s tenants are canceling their leases and not ordering up Beyond Meat burgers that would normally be delivered by Uber Eats. Furthermore, this trickled down to the Value/Momentum narrative with Value stocks looking poised to add onto recent gains.
This week’s highlights are:
- Risk Gauges retreated although still positive
- Solar Stocks (TAN) were the strongest industry group +8.6%
- Biotech (IBB) bucked the downside action and held long term moving averages
- The S&P 500 twice touched all-time highs this week and could not follow through
- All key US stock indexes closed under their 10 day moving averages on good volume.
- Value stocks look poised to regain strength verses growth
- Utlilities outperformed the benchmark S&P500 and the ratio moved to risk off
- Gold and Gold Miners regained leadership
- Long Bonds (TLT) regained its bullish phase
- Consumer Discretionary (XLY) backed off a risk off indicator
Another highlight of the week is the deterioration in Market Internals and Sentiment which I will cover in this week’s premium video. Considering all the cross currents, adding expert discretionary trading to your mix is timely and here is the link.
Like to learn more about relative strength methodology? Our most recent free training material can be found more
There is concern because the growth has slowed. That said, it seems to be slowing back down to the same level it has been for some time after sugar highs caused by the tax cut and some levels of deregulation. Sugar highs don't last forever, although they do risk nasty downtrends after they occur.
Now we are dealing with central bank sugar. It has no stomach for recession.
The Fed rate cut will not be much of any sugar high. If the Fed is forced to approach zero bound rates, the European and Japanese experience proves that it is really game over for monetary stimulus. And the US has no appetite for fiscal stimulus, not a sanguine prospect.
I would agree. However, the Fed is trying to stimulate a little without getting too close to zero. The Fed is afraid of recession, because of derivatives, yet it is afraid of zero and afraid of inflation. With the trade war it makes monetary policy even more complex. I think you are right, not much of a sugar high. Trump wants negative rates. He is a crazy old fossil.
Indeed negative rates are bad news. Trump doesn't know what he is talking about when talking about currency or rates.