Weighing The Week Ahead: What Determines The Agenda For Investment News?

The economic calendar is one of the lightest, and a long holiday weekend impends. How will this news vacuum be filled? Probably with celebrity news, following the latest tweets, analyzing any new Democrats running for President, and interviews with B-level guests. Rather than guessing which of these will dominate – an exercise in futility – I will take the suggestion of a wise reader. He encouraged me to choose what I thought was most important. That was good advice. We should all be asking: What determines the agenda for investment news?

Last Week Recap

In last week’s installment of WTWA, I noted the big economic calendar and the abundance of news. My surprising conclusion was that there was a stalemate on all fronts. The tweeting and news-driven market moves continued, but there was little real change. Briefing.com’s “The Big Picture” summarized the week as follows:

The more things change, the more they stay the same for the stock market
 
The week we just had will wear out a person, especially a market analyst like your author who is tasked with analyzing and explaining the daily twists and turns of the stock market.To be sure, there were a lot of twists and turns this week on the same road to nowhere.

The mounting evidence shows the widespread negative effect of the trade war. This is a real-time lesson in economics for many. I cut through the noise with an investor-oriented summary of the trade situation in a post on Friday. It is a recap of action to date, some of the economic effects, and what to watch for. And of course – your political opinions, no matter how righteous and valid, do not improve your ability for level-headed analysis.

For those who need good background on the story, CFR has a good backgrounder by Andrew Chatzky. There are also links to other current articles. Reading this is a much better use of your time this week than watching financial news.

The Story in One Chart

I always start my personal review of the week by looking at a great chart. This week I am featuring Jill Mislinski’s picture replacing many words, showing the week and a longer-term perspective.

The chart shows a gain on the week, but that was only after the gap decline in Monday’s opening. The week-to-week decline was 0.7%. The trading range for the week was 3.2%. The resulting volatility is recorded, as always, in our weekly indicator snapshot.

Noteworthy

The passing of Alice Rivlin. Heather Boushey (Washington Center for Equitable Growth) posts Alice Rivlin: An inspiration for generations of women economistsThat is what we bridge players call “an underbid.” The statement is correct but inadequate. I was powerfully influenced by her ability to speak truth to power, as were many of my peers regardless of gender. As the first Congressional Budget Office Director, she influenced policy analysis in ways that we cannot begin to count. Boushey writes:

Serving for more than 8 years, she built the Congressional Budget Office from the ground up and along the way set the tone for an organization that has, for the most part, withstood partisan pressure from both sides of the aisle to be considered the nation’s most reliable source of unbiased data and analysis on budgets and legislation.

Timothy Taylor has another nice memorial using many of her own words. I often marvel about how apparently unrelated events have important implications. Here is the backstory on her selection as the first CBO director:

 I was the candidate of the Senate. They, rather stupidly, had two separate search processes, one in the Senate and one in the house. I told them they should never do that again, and they haven’t. But that left them with two candidates. I was the candidate of the Senate and a very qualified man named Sam Hughes, who had been the deputy at OMB—no, at the Government Accounting Office— was the other candidate. But the chairman of the House Budget Committee was a man named Al Ullman, and Mr. Ullman had said in an off moment, over his dead body was a woman going to get this job. So, there was kind of a standoff, and then it was solved by an accidental event. The chairman of Ways and Means was a powerful congressman from Arkansas named Wilbur Mills, and he was a mover and shaker in the Congress and a very intelligent man. But he had a weakness—he was an alcoholic. And one night he and an exotic dancer named Fanne Fox were proceeding down Capitol Hill toward the Tidal Basin in his car and Fanne leapt out of the car and into the Tidal Basin. She didn’t drown in the Tidal Basin—it’s quite shallow—but it was a scandal and Wilbur Mills had to resign. And Al Ullman, chairman of the Budget Committee, was ranking member on Ways and Means, so he moved up. And that left a new chairman who wasn’t committed to the previous process, Brock Adams, and he said to Senator Muskie, who was my sponsor, if you want Rivlin it’s okay with me. So, I owe that job to Fannie Fox.

I seem to recall that Ms. Fox was known as “The Argentine Firecracker.” Much changed after this episode, in a day when such dalliances were strictly prohibited – at least when they became public.

The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too.

When relevant, I include expectations (E) and the prior reading (P).

New Deal Democrat’s high frequency indicators are an important part of our regular research. In his post this week he reports that indicators in all time frames remain positive. His continuing concern is that the indicators “have been showing effects of political or policy moves, especially tariffs, as well as the recent government shutdown. These moves, for good or ill, can blindside the economy and have immediate effects.”

The Good

  • NFIB Small Business Optimism remained high (103.8) and improved over March’s 101.8. (Calculated Risk).
  • Homebuilder confidence posted solid gains in May – 66 versus April’s 63. (Calculated Risk).

  • Initial jobless claims edged lower to 212K. This beat expectations of 222K and last week’s 228K.
  • Market sentiment is encouraging. David Templeton (HORAN) points out that you can look at the AAII survey, 43.1 and higher than the average 38.5, or you can look at the reality of fund flows. He also notes a favorable put/call ratio.
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Dick Kaplan 4 weeks ago Member's comment

Always a pleasure to read this every week.