Tom Essaye Quoted in CCN

The Sevens Report founder Tom Essaye said:

“The drama is centered on just how strongly the Fed will signal that it’s going to cut rates again by the end of 2019. It’ll be the ‘dots’ and statement that determine whether the Fed meets market expectations…” Click here to read the full article.

New York traders

Tom Essaye Quoted in Invezz on September 18, 2019

“The drama is centred on just how strongly the Fed will signal that it’s going to cut rates again by the end of 2019. It’ll be the ‘dots’ and statement that determine whether the Fed meets market expectations…” said Tom Essaye, founder of the Sevens Report in a note, as quoted by CNBC. Click here to read the full article.

Tom Essaye Quoted in CNBC on September 17, 2019

“The drama is centered on just how strongly the Fed will signal that it’s going to cut rates again by the end of 2019…” Tom Essaye, founder of The Sevens Report, said in a note. Click here to read the full article.

NY Traders

Fed Meeting Preview and Saudi Oil Update

What’s in Today’s Report:

  • FOMC Preview
  • Two Sectors that Will Benefit from the Saudi Oil Attacks
  • What the Attacks on Saudi Oil Infrastructure Mean for Oil

Futures are suffering mild losses this morning while international markets were little changed overnight as oil prices are stabilizing, economic data was mixed, and investor focus is shifting to the Fed.

Economically, the German ZEW Survey showed the Current Conditions index fell to –19.9 vs. (E) -15.0 but the Business Expectations figure was encouragingly –22.5 vs. (E) -38.0, easing concerns about the future outlook for the EU economy.

The PBOC left rates unchanged overnight, disappointing some investors looking for a cut after a recent string of soft economic data which weighed on Asian markets.

Looking into today’s session, there are two economic reports to watch: Industrial Production (E: 0.1%) and the Housing Market Index (E: 66) but a sense of “Fed paralysis” is already falling over the markets as focus turns to tomorrow’s announcement and press conference.

Lastly, after oil’s huge moves yesterday, the energy complex will continue to get attention and with the geopolitical situation still very fluid, oil prices and U.S.-Iran tensions could affect trading in stocks today.

Updated Market Multiple Table

What’s in Today’s Report:

  • Updated Market Multiple Table
  • Contrarian Play: Bullish Breakouts in the Energy Patch

U.S. stock futures are suffering mild losses this morning as investors digest yesterday’s more pronounced sector-rotation money flows amid mixed economic data with focus turning to central bank events over the next week.

Chinese CPI and PPI were slightly firmer than expected in August, while French and Italian Industrial Production figures were underwhelming.

In the U.S., the NFIB Small Business Optimism Index was a mild disappointment at 103.1 vs. (E) 103.5 mostly due to declining growth expectations.

The mixed economic data, however, was not enough to materially affect investor sentiment and therefore is only having a modest impact on price action this morning.

Today, there is just one economic report to watch: July JOLTS (E: 7.311M) and there are no Fed officials speaking as they are in their “blackout period” ahead of next week’s FOMC meeting.

That will leave investors focused on the recently emerging “rotation trade,” and due to the heavyweight that tech stocks carry in the major indexes, if big tech names remain under pressure today, that will likely be a drag on the broader market.

Tom Essaye Quoted in CNBC on September 3, 2019

“Going forward, the dollar will have a hard time declining unless the Fed gets aggressively dovish, simply because global growth remains lackluster and global central banks are easing policy…” said Tom Essaye, founder of the Sevens Report. Click here to read the full article.

Man holding $100 bills

Tyler Richey Quoted in Bloomberg on July 4, 2019

“From a demand standpoint, the question is will the Fed save the day” or “are we too far gone?” said Tyler Richey, co-editor at Sevens Report Research in Florida. Click here to read the full article.


Mind the Fed Funds Gap

What’s in Today’s Report:

  • Mind the Fed Funds Gap

S&P futures are slightly lower as this week’s dovish rally to new all-time highs is digested amid further escalations between the U.S. and Iran while economic data was mixed.

The U.S. reportedly called off a retaliatory strike against Iran “at the last minute” overnight which is weighing on investor sentiment but supporting oil prices (Brent +1.60%).

Flash PMIs were mixed o/n with Asian data slightly underwhelming while European data slightly beat expectations. But none of the releases were too far from estimates so the data is not materially affecting markets this morning as investors remain focused on this week’s dovish shift in central bank policies and look ahead to the G20.

Today, there are two economic releases to watch: Flash Composite PMI (E: 50.9) and Existing Home Sales (E: 5.28M). It will be important for the former to remain soft to keep the “Fed Put” alive, but not so bad that the data stokes fears that the Fed is “too far behind the curve.”

Speaking of the Fed, Brainard and Mester speak on a panel together at 12:00 p.m. ET and Daly is scheduled to speak at 12:30 p.m. ET. Given the market’s significant dovish shift in policy expectations this week, investors will be watching closely for any further clues as to when the Fed plans to cut (July?) or by how much (25 or 50 bp?).

Tom Essaye Quoted in Barron’s on June 18, 2019

“Today will likely be dominated by pre-Fed positioning and trading should be quiet, although there’s always the chance we get a U.S.—China trade…” writes Tom Essaye. Click here to read the full Barron’s article.

Upward graph

Perspective on Yesterday’s Rally

What’s in Today’s Report:

  • Perspective on Yesterday’s Bullish Catalysts (Draghi’s QE reference, Trump’s tweet)
  • Is ECB QE Bullish for European Stocks?

Futures are little changed following a quiet night as markets digest yesterday’s events (Draghi dovish, Trump’s positive U.S./China tweet) ahead of the Fed later today.

In contrast to the suddenly positive mood on the Street, economic data again was disappointing.  German PPI missed expectations (1.9% yoy vs. (E) 2.2% yoy) as did British Industrial Trends (-15 vs. (E) -12), but neither number is moving markets.

Today is clearly all about the FOMC Decision at 2:00 p.m. ET.  There’s virtually zero chance of a rate cut at this meeting, so the keys to watch will be 1) Whether the word “patient” is removed from the end of the second paragraph (signaling a looming rate cut) and do 2) The dots show no rate hikes in 2020 and 3) A cut in 2019.

If the answer to each of these is “yes” the meeting will be dovish and likely extend the rally. If the answer is “no” to all three it’ll be hawkish and stocks will get hit, and if we get a mixed bag, the reaction from markets shouldn’t be too drastic.


Sevens Report Quarterly Letter

Next week is the final week of the quarter, and we’ve already begun working on the Q2’19 Sevens Report Quarterly Letter.

The Q2 Quarterly Letter will be delivered to subscribers on July 1st.

Volatility returned and investors are now facing multiple risks including: 1) Trade uncertainty, 2) Worries about economic growth, 3) Geopolitical concerns and 4) Shifting Fed policy.

Investors I speak with want to hear from their advisor in this environment. That’s why we’re producing the letter on the 1st business day of the quarter, because we want you to be able to impress clients by sending them your quarterly letter before your competition (and with little-to-no work from you).