E Market Briefing For Monday, Aug. 19


For sure I understand their perspective. While they temper business cycle behavior (in this case an expected trade-sensitive technology transition year as well as a needed normal market correction); they are not advocating any sort of responsible behavior; which would have the Fed primarily responsive to domestic stability and retaining relative strength to our paper, which does attract funds, and holds the Dollar stable. Those calling for a weaker Dollar generally must not grasp that our currency tends to stay firm in a low-rate environment, and that there is an economic downside to weakening it too.

Conclusion: this can become episodic over time if too much fiddling occurs especially as the consumer is not that weak; and business is slow but not in freefall. They can push it over the cliff if they continue to panic Americans. 

Meanwhile the behavior of the S&P is 'mid-stream' in a projected correction from our early-mid-July highs; and is trying to hold the past two weeks lows in-hopes that it can stabilize all the way into the upcoming trade Meetings. If it fails after that (or if it's cancelled); then there's even more pressure for the Fed to cut (ill-advised) and greater risk of the S&P breaking to lower levels, probably as all the 'race to the bottom' cheerleaders gaze aghast at that.


The corollary of course is that price-stability in this anticipated roller-coaster time of year, can be solidified a bit if there 'is' a China deal and if the Fed in their ultimate wisdom, resists some pressures to waste all their ammunition; since it won't prevent, and might even precipitate, a further liquidation. 

I am glad the President was 'receptive' to the arguments in a conversation, a couple days ago, with CEOs Dimon, Moynihan, and others; regarding the need to sort out some of these issues. It's not up to the President alone but it sure would help if he'd get on-board the idea of enhancing stability, rather than oscillating so much that it stokes uncertainty; which markets of course not only disdain; but make resolutions inherently tricky. 

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