Welcome to this week’s State of the Markets video discussion centered on the equity markets. Please click the link provided to review the video discussion between Seth Golden and Wayne Nelson where they dive into all things market related.
- Discussion centered latest geopolitical rift between the U.S. & MexicoThe U.S. and Mexico trade about $1.7 billion in goods daily, according to the U.S. Chamber of Commerce, which had said closing the border would be “an unmitigated economic debacle” that would threaten 5 million American jobs. In recent days, Trump has appeared to put his threat on hold, praising the Mexican government for doing more to apprehend migrants traveling through the country from Central America. On Thursday, Trump also threatened tariffs if Mexico doesn’t halt the flow of illegal drugs across the border, saying he’d give the country “a one year warning” to comply. (0-6 minutes in)
- Discussing on the economy, moving from above trend growth in 2018 to a trend growth economy (slowing economic conditions). Going back to July 2018 most economic data points from Manufacturing to factory orders peaked ahed of the tariff implementations between China/U.S.
- Recessionary conditions aren’t present in the economic data presently. Yield curve may not as strong an economic indicator as it had been in the past. Fed’s quick pivot may have distorted the yield curve indicator efficacy.
- 2001 should have never been labeled a recession (nominal GDP in 2001 was 1%). 8-month long, yield curve first reverted in 1998.
- Excesses and lack of regulation have usually led to recession, such conditions are only residually present in today’s economic expansion cycle.
- Trough PMIs and ISM numbers may signal a turn higher in the economy with various Fed regions raising their forecast for Q1 GDP. (6-23 minutes in)
- Housing sector may have or be in the process of bottoming as rates turned significantly lower since November 2018. 30-yr fixed mortgage rate has decline from 4.95% in 2018 to 4.08% presently.
- Bond prices are rising (yields falling) because safe haven treasuries can’t be found in other regions, German bund and Japanese bonds have negative yields. The world wants U.S. debt.
- New home sales have surged with mortgage rates on the decline. New home sales hit an 11-year high in February.
- Demographics still do not favor the housing sector presently with millenials overtaking the economy as the largest consumer demographic that is forming households at a very slow pace compared to previous generations. (23-29 minutes in)
- Discussion on what tends to happen after the FOMC stops hiking rates/tightening.
- Market decline in 2001 was due to early year dot-com bust (NDX mainly) and September 11 attacks.
- 2008 recession was due to excess and a lack of regulation in the housing & mortgage sector/market.
- Commenting on the IPO market, unicorns (29-37 minutes in)
- Jobless claims have decline for 3 consecutive weeks and hit the lowest levels since 1969. 4 week moving average is back to levels seen in mid-January. Jobless claims portend more favorable for a bounceback in the Nonfarm Payroll numbers to be released Friday.
- There is a lot of angst amongst investors related to the NFP report. VIX futures have held up ahead of the NFP data and the VIX itself has found little movement even as the S&P 500 has moved higher into the NFP report.
- The NFP report is determined to be a binary event. If the number is another big miss, the market has the potential to deteriorate substantially and given the YTD gains in the market. But if it proves favorable or even benign, the S&P 500 could head to 2,900. (29-44 minutes in)
- Wrapping it all up with a completed trade alert on the day (44-50 minutes in) Thank you for reviewing this week’s State of the Markets. Subscribe to finomgroup.com, receive our weekly Research Report and daily/weekly trade alerts. Join in with our live daily Trading Room!
