Posts

How to Explain Any Pullbacks to Clients

/in , /by

What’s in Today’s Report:

  • How to Explain Any Pullbacks to Clients (Why Too Hot or Too Cold Data Is a Negative for Markets)
  • Weekly Market Preview:  Can Goldilocks Data Continue to Support Stocks?
  • Weekly Economic Cheat Sheet:  All About Jobs (Jobs Report Friday, Claims Thursday, ADP Wednesday, JOLTS Tomorrow)

Futures are little changed following mixed global economic and inflation readings.

In China, the July PMIs were mixed as manufacturing was slightly better (49.3 vs. (E) 49.2) while services were worse (51.5 vs. (E) 52.9) and the result is markets will still want more stimulus from Chinese officials.

On inflation, EU flash core HICP (their CPI) rose 5.5% y/y vs. (E) 5.4% y/y, hinting at stickier than expected inflation.

This will be a busy week of data and earnings, but it starts slowly as there’s just one notable economic report today, the Chicago PMI (E: 43.5) and only a few notable earnings: ANET ($1.43), ZI ($0.23), WDC ($-2.01).  So, barring any major negative earnings announcements, we’d expect generally quiet trading ahead of an increase in activity starting tomorrow.

Gold and Real Interest Rate Update, What It Means for the Economy, July 19, 2017

/in /by

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James and more… see if The Sevens Report is right for you with a free two-week trial.

Gold rallied 0.67% Tuesday, as political angst spurred a fear bid while strength in the Treasury market continued to help the “real-rate” argument for gold. British inflation data missed expectations, and that was the third release since Friday that showed below-expected price pressures.

That trend helped fuel dovish money flows, which ultimately bolstered the case for gold, because a lower pace of inflation changes the narrative of the world’s central banks. It’s also cause for recalculation of the real interest rate equation (which is simply interest rates minus inflation rates equals real rates).

If real interest rates are actually poised to move lower (as nominal rates fall and inflation remains flat/does not accelerate) that will be bullish for gold and the rest of the precious metals, as they are safe-haven assets that do not offer yield.

For now, we remain neutral on gold due to the technical support violation in early July. Looking ahead, it’s all about the fundamentals, which come back to real rates.

If real rates continue to fall, even because of soft inflation causing a slightly dovish shift in central bank expectations, that will be bullish for gold long term.

From a broader standpoint, if real rates fall further, that will mean that the economy is struggling, or at the very least not meeting expectations. That will be a concern for stock investors, and ultimately holding gold allocations would be a sound hedge against volatility.

The Sevens Report is the daily market cheat sheet our subscribers use to keep up on markets, seize opportunities, avoid risks and get more assets.