Did the Yield Curve Actually Invert?

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What’s in Today’s Report:

  • Why Italian Political Drama Matters to You
  • Did the Yield Curve Actually Invert? Only Sort Of

Futures are solidly higher this morning, rising in sympathy with EU shares as Italian political concerns ease while a German Bond auction was unexpectedly weak, both of which are helping bolster stocks.

In Italy, odds of a coalition government being formed are rising materially, reducing fears and general uncertainties surrounding new elections this fall.

Economic data was thin o/n however there was a soft 30-Year Bond auction in Germany this morning which is helping yields rise and fueling general risk-on money flows.

After a choppy start to the trading week, the list of market catalysts picks up today as there is one economic report: Existing Home Sales (E: 5.380M) but investors will be primarily focused on the July FOMC Meeting Minutes (2:00 p.m. ET).

If the Minutes release is another “hawkish disappointment” like the announcement and Powell’s press conference were in late July, we could see another wave of volatility as investors’ dovish hopes are elevated going into the Jackson Hole Economic Symposium later this week.

Tyler Richey Quoted in MarketWatch on August 13, 2019

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“Looking ahead though, the outlook for oil remains neutral at best right now as global growth concerns remain the single biggest headwind for…”  said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Man in an Oil rig

Updated Market Multiples

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What’s in Today’s Report:

  • Market Multiple Table Updated

Futures are drifting higher this morning, tracking gains in overseas markets as the recent rally in global equities is digested amid a much quieter macro backdrop this week.

Sentiment towards the trade war has been improving since Friday as the Trump administration appears increasingly concerned with the impact of tariffs on the U.S. economy, and that is continuing to act as a mild tailwind on stocks.

There were no material economic reports or other market-moving headlines overnight.

Looking into today’s session, there are no economic reports in the U.S. however there are two more Fed officials scheduled to speak before Powell’s Jackson Hole speech on Friday: Daly (4:30 p.m. ET) and Quarles (6:00 p.m. ET).

If Daly and Quarles have a similar tone to Rosengren from yesterday, which was “less dovish” that could weigh on stocks in the after-hours session (both speakers are after the bell) as expectations for Powell to deliver a more well-defined, dovish policy outlook on Friday will be dialed back.

Progress on U.S./China Trade?

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What’s in Today’s Report:

  • Updated Market Outlook
  • Weekly Market Preview (This Week is More Important Than It Might Seem)
  • Weekly Economic Cheat Sheet (All About Growth)

Futures are solidly higher again as the Commerce Department extended Huawei waivers for 90 days, which is a mild positive in the U.S./China trade situation.

There were a lot of trade-related headlines out over the weekend (and some of them were conflicting) but the net/net is that tensions appear to be receding somewhat, which is helping to support an extension of Friday’s rally.

The only notable economic report was Japanese exports, which met expectations at –1.6% m/m and isn’t moving markets.

There are no economic reports today and no Fed speakers, so focus will be on any trade-related headlines and while we’re sure to get conflicting messages via twitter and other mediums, the bottom line is that tensions appear to be receding – which is positive for stocks.

Looking forward to this week, it’s an important one.  Powell’s Jackson Hole speech on Friday, combined with FOMC Minutes Wednesday and the global flash PMIs will give us important updated insight into 1) Whether central banks are going to try and correct the hawkish disappointments from July, and 2) If global growth is trying to stabilize.  If the answer is “yes” to both, then stocks can extend the rally.

Tom Essaye Quoted in Benzinga on August 14, 2019

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“So, while the inversion is certainly a disconcerting signal over the medium and longer-term, it’s not a signal to necessarily ‘sell now,’ because a lot can happen between now and six months or more…” wrote Tom Essaye. Click here to read the full article.

Stock Market

Tom Essaye Quoted in CNBC on August 15, 2019

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“The yield curve inverted which created a temporary ‘pile on’ effect in the bond markets. We have absolutely not seen what we wanted to out of the Fed. We had hoped for a rally in the 10-year yield…” wrote Tom Essaye of the Sevens Report. Click here to read the full article.

Graph

 

Why the Falling Yuan Isn’t That Big of a Threat

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What’s in Today’s Report:

  • Why The Falling Yuan Isn’t That Big of a Threat

Futures are solidly higher thanks to continued momentum following Thursday’s positive close.

Stocks were short term oversold and due for a bounce, but if there’s a “reason” behind the early rally it was a Washington Post article stating the Trump administration is getting concerned about future economic growth, which might lead to a trade deal.

There were no notable economic reports overnight.

Today the calendar is more quiet as we only have two economic reports, Housing Starts (E: 1.260M) and Consumer Sentiment (E: 97.5).  But, the Huawei waiver deadline is Monday the 19th so if there are going to be waivers given, it could happen literally at any minute (generous waivers will supercharge today’s early rally if they come).

Tom Essaye Quoted in Diario Financiero on August 14, 2019

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“Historically speaking the inversion of that benchmark yield curve measure means that we now must expect a recession anywhere…” said Tom Essaye in a note on Wednesday. Click here to read the full article.

Stock trader

Tom Essaye Quoted in Vanity Fair on August 14, 2019

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“Historically speaking the inversion of that benchmark yield curve measure means that we now must expect a recession anywhere from 6 to 18 months from today…” said Tom Essaye in a note on Wednesday. Click here to read the full article.

Trump on a Fire Truck

Tom Essaye Quoted in CNBC on August 14, 2019

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“Historically speaking the inversion of that benchmark yield curve measure means that we now must expect a recession anywhere from six-to-18 months from today which will…” said Tom Essaye in a note on Wednesday. Click here to read the full article.

Yield Curve Graph