E Market Briefing For Wednesday, June 12

In sum: the market's positioning itself for meaningful S&P moves either way by virtue of this thrust higher; and whether it's an appropriate repricing isn't known. What is known is that the daily overbought status is reestablished to a degree; but if you get a 'deal', you can move stocks even higher; briefly.  

Presuming you don't get a 'perfect deal', the market will be mixed and they'll focus again on the Fed, which incidentally isn't a rock-solid assumption. The crowd presumes a strong earnings season (better than might be thought in a tariff-era, which however hasn't had much real-world impact on pricing as of yet); and there is greater embrace (and evidence) of our view that a great many companies are resourcing their supply-chains (for some time now); so it raises the bar for China to make a deal to plug the leakage to countries of course with low production costs, or in some cases back to the USA.  

 

 

The Fed (if they cut as an 'insurance' and politically expedient move they're fond of saying they won't do) while they're in a rock-and-hard place. Given a sluggish economy, but one that's not falling off-a-cliff, we're looking primarily at foreign rates low (globally really); attracting funds to the U.S. (we want to keep that going, and Washington may not widely grasp that); while it relates to 'relativity' compared to yields overseas.  

Now the G20 still is key; and maybe we'll hear about coordinated stimulus (I am not taking sides, but in a way disdain essentially negative rates, while it is fairly clear that central banks are nervous as heck about trying to restrain decline from becoming outright deflation; a word they all hate to use). There is a squeeze, and the U.S. cutting might emphasize both concern and even recognition of the excess of that last rate hike.  

Bottom line: progress at G20; a Fed rate cut; and/or a China deal... all are capable of thrusting S&P higher, but unlikely sustainably. None occurring iseither going to provoke a significant declining phase or (perhaps likely) we'll get some but not all of that; resulting in a sort of rotating swing we've gotten accustomed too (and was actually our forecast during parts of this year and much of last year until the 2nd 'crash alert' call in early September). Not very exciting; but it was valid analysis of the situation.  

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