Tom Essaye Interviewed with TD Ameritrade Network on November 20, 2019
Tom Essaye interviewed with Oliver Renick from TD Ameritrade, discussing Bonds vs Equities, trade war, yield curve, reflation and more…Click here to watch the full interview.
Clearing the Trade War Fog
What’s in Today’s Report:
- Clearing the Fog: Where Are We on U.S.-China Trade?
U.S stock futures are trading lower and international markets saw broad declines overnight thanks to escalating trade tensions between the U.S. and China.
The Senate passed a bill late Tuesday in support of the Hong Kong protests to which the Chinese Foreign Ministry has issued a strong statement of disapproval for.
Additionally, Trump threatened higher tariffs at a cabinet meeting yesterday and the combination is weighing on sentiment.
There are no economic reports today and no Fed officials scheduled to speak but the minutes from the October FOMC Meeting are due out at 2:00 p.m. ET which will be closely watched for further clues on the Fed’s future policy plans.
The trade war is still dominating markets right now so investors will be watching for any rebuttals from the U.S. regarding China’s negative response to the “Hong Kong bill” or any additional talk of future tariff policy from either the U.S. or China.
Yield Curve Update: Critical Levels to Watch
What’s in Today’s Report:
- Yield Curve Update: Critical Levels to Watch
- Housing Market Index Takeaways
Futures have steadily melted higher overnight, tracking risk-on moves in most international markets on optimism for more Chinese stimulus and improving investor sentiment towards the trade war and health of the global economy.
Over the past two weeks, the PBOC has lowered its “one-year medium-term lending facility” and its “seven-day reverse repo rate” increasing the odds that the Chinese central bank provides further stimulus in the near-term.
Looking into today’s session, the list of potential catalysts is limited as there is just one economic report due to be released: Housing Starts (E: 1.320M) and one Fed official scheduled to speak shortly before the bell: Williams (9:00 a.m. ET).
Home Depot reported underwhelming earnings this morning as they slashed their sales forecast which will likely be a topic of discussion today but so far, stock futures are largely shrugging off the sharp drop in HD shares.
With the trade war still the markets primary focus, stocks will remain sensitive to any headlines, positive or negative, regarding the phase one deal and potential for tariff relief.
Trade Hopes, Momentum, and New Highs
What’s in Today’s Report:
- Bottom Line: Momentum and Hope Continue to Fuel the Rally
- Weekly Economic Cheat Sheet: Focus on Friday’s Flash PMIs
U.S. futures are modestly higher and most international markets rallied overnight thanks to more trade war optimism and unexpected stimulus by China’s central bank.
A “constructive” phone call between China’s Liu He, USTR Lighthizer and Secretary Mnuchin reportedly took place on Saturday which is helping boosting hopes for a trade deal.
Additionally, the PBOC cut a key interest rate for the first time in 4 years, offering a dovish tailwind to risk assets this morning.
Today is lining up to be a fairly quiet session as far as catalysts go as there is just one economic report: Housing Market Index (E: 71) and only one Fed official is scheduled to speak: Mester (12:00 p.m. ET).
With trade war optimism continuing to be the main driver of this most recent run to new all-time highs the markets will remain keenly focused on any new developments or news regarding the “phase one” trade deal.
Whose Telling the Truth on U.S./China Trade? Stocks or Treasuries?
What’s in Today’s Report:
- The Current State of U.S./China Trade Negotiations: Whose Telling the Truth? Stocks or Treasury Yields?
- Why A Spike in Jobless Claims Caught Our Attention (Highest Since June)
Futures are marginally higher as the U.S./China trade saga remains the singularly dominant influence on markets.
The commentary overnight was positive as Larry Kudlow said the “mood music” of the negotiations was “pretty good” and a deal is close, although there was no actual new information presented.
Economically there were no surprises as EU HICP (their CPI) rose 1.1%, as expected.
Today there are several important economic reports including (in order of importance): Retail Sales (E: 0.2%), Empire State Manufacturing Survey (E: 5.0) and Industrial Production (E: -0.4%). Broadly, markets need to see strong data to imply the U.S. economy is stabilizing and starting to re-accelerate.
But, beyond the data, U.S./China trade will remain a huge influence over stocks so any more headlines that a phase one deal is imminent will likely send stocks higher (even if there is no actual news contained in the comments).
Sevens Report Co-editor Tyler Richey was Quoted in MarketWatch on November 14, 2019
The bearish supply and production data by the Energy Information Administration and “lack of clarity” on the U.S.’s plans for tariff policy changes as part of the phase one trade deal with China, are “both negative influences on the market…” said Tyler Richey, co-editor of Sevens Report Research. Click here to read the full article.
Sevens Report Co-editor Tyler Richey was Quoted in MarketWatch on November 13, 2019
“Trade war concerns are being offset by positive comments on the global economy by both Fed Chair Powell and OPEC’s Secretary General Barkindo…” said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.
Valuation Update: Dangers of FOMO (Fear of Missing Out)
What’s in Today’s Report:
- Valuation Update: Dangers of FOMO (Fear of Missing Out)
Futures are slightly lower as a potential “stall” in U.S./China trade talks and disappointing data weigh marginally on global stocks.
Chinese economic data was universally disappointing, as Fixed Asset Investment, Retail Sales and Industrial Production all missed estimates. The soft numbers implied the global economic rebound expected by stocks isn’t a done deal just yet.
Today there are two notable economic reports, Jobless Claims (E: 215K) and PPI (E: 0.3%) and a figurative parade of Fed speakers including (in order of importance): Powell (10:00 a.m. ET), Clarida (9:10 a.m. ET), Evans (9:10 a.m. ET), Daly (11:45 a.m. ET), Williams (12:00 p.m. ET), Bullard (12:20 p.m. ET).
But, the data points shouldn’t move markets, and neither should any of the Fed speak because Chair Powell spoke yesterday and clearly signaled the Fed is on hold, which is what the market expects and has priced in.
So, we can expect trade commentary and headlines to move markets. Clearly the market is ignoring the phase one “stall” headlines, otherwise, stocks would be down sharply this morning. But, headlines worsen and the stall increases the risk of a phase one breakdown, that will hit markets hard.
Tom Essaye Quoted in Invest Records on November 11, 2019
“Stocks hit fresh new highs last week on a familiar theme: Positive chatter/headlines on phase one of a U.S./China trade deal, while earnings and global data…” wrote Tom Essaye, president of the Sevens Report, in a Monday note to clients. Click here to read the full article.
Tom Essaye Quoted in ETF Trends on November 11, 2019
“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…” Tom Essaye, founder of The Sevens Report, said in a note this summer. Click here to read the full article.
