Early each morning, I scan and synthesize market-moving news. I look at macro themes, currency moves and global economic indicators that support or challenge my thinking on the Big Picture and help me take the mood of the market. I like to assemble these data points and turn them into context for my clients. While surveying the market landscape, I am also actively looking for new momentum and value trades for my  Live Trading Room   and some may even make it into my Live Portfolio, Brokerage-Triggered, Trade Alerts! To catch all the live trading action, join me 9:00am - 12:00pm ET every trading day. I look forward to fishing with you!

Market Thoughts

No more Mexican Standoff sends stocks briskly higher last week. And this despite a MarkIt Manufacturing PMI barely above 50, the 37M low in ISM, the Global Biz confidence breaking 50, yield curve concerns and a very weak NFP. Bad news is now good news, thanks to Powell intonating they will cut rates.
Basically, in lieu of a big market sell off on slowing growth and trade jitters, the market is still expecting the “Art of the Deal” from Trump on China and the Fed cutting 75 basis points worth this year. And all of this front-running is nothing compared to the G20 meeting in Japan end of month when Trump and Xi will have a “beautiful meeting” and markets will rally some more!
If not, they could follow my path prediction –
My side-ways to lower into 2020 market call has some merit if projecting out supply chain shocks and employment trend data. SamanthaLaDuc

On Yields and MOVE

Interest Rate volatility has been picking up steam, outpacing credit and equity volatility of late – reaching the highest levels in over 2yrs. Another words: as both Volatility on both Long and Short ends of the yield curve rise, expectations rise for a big $MOVE.

My Fed guesses – and they are just that:

1. As Powell says, we have a “strong labor market and inflation near our symmetric 2% objective.”
So realistically they should hike rates not cut! But Trump wants cuts. The markets want cuts. Trade Wars may warrant cuts to negate the effects of tariffs.
Although the stage is set for the Fed to cut rates, policy makers won’t have sufficient data to act until the end of the summer. A move at the September meeting is a reasonable baseline at this point. If the data deteriorate more quickly, or if markets seize up, pull that cut forward into July. If trade tensions ease and growth stays strong, push it back. Tim Duy
2. Powell Pivoted Jan 4, 2018 when he went to “neutral” post 9 rate hikes – so given goalposts of jobs and inflation are still in the zone, why did Fed pause? Well because Credit FROZE and markets sold off hard in December. Clearly, Fed is reactive NOT data dependent.

“Every time the Fed shifts to a more dovish policy stance, the greater the markets’ demand”

3. Credibility cuts both ways. Powell lost his when he pandered. Still, for some it was too little too late, as Trump said: “our Fed is very, very destructive to us” . No one is talking about it, but how long does Powell have this job if he doesn’t cut? And if Fed cuts rates this year, who is to say a looser Fed would boost growth? I just see this whole brinkmanship as dangerous and likely to backfire and spook investors. The MOVE is likely going to move higher.

Inspired Thought

How long can markets maintain increasingly elevated asset prices that are decoupled from the underlying economic and corporate fundamentals? Given the remarks this week of Fed officials, it seems no longer a question of whether the Fed will cut rates but rather when and by how much. But there is a deeper two-part question that remains unanswered, and it’s much more consequential: Would such cuts even lead to sustainably and substantially higher consumption and investment; and, if not, how long can markets maintain increasingly elevated asset prices that are decoupled from the underlying economic and corporate fundamentals?

…dynamics feeding into a “negative supply shock” is the closest thing to recession risk the U.S. faces right now, a scenario that would create different dynamics than the last two recessions.
 
There’s a risk for a self-fulfilling cycle of market instability and economic disruptions…their willingness to underwrite so much liquidity risk in the last few years, and to structurally embed it in the system via a proliferation of ETFs and other instruments, increases the risk of heightened internal financial instability that could spill back into the economy.
There is a threat of protracted economic global slowdown given recent data and lingering trade wars and their impacts from tariffs.
And that loss of global momentum may have helped fuel our market advance (cleanest shirt in the laundry) but risks are the threat “throws some countries into recession, ignites debt concerns in some advanced and emerging economies, and fuels additional market instability through liquidity air pockets.
A global trade triggered slowdown is causing investors to hide out in US assets (S&P 500, Treasuries, USD). We believe a capital flood out of the US is on our doorstep. Larry McDonald
In short, having been able to hike nine times since late 2015, the Federal Reserve – unlike the European Central Bank and Bank of Japan – has built up a cushion for rate cuts should the economy weaken. But Trade Wars, USD and fed policy mistakes make the path less sure.

Economic Calendar

The economic calendar focuses on inflation data (US, China and Germany), consumer confidence, and the JOLTS report. Fed black-out period means we likely chop into FOMC June 19th with no additional ‘rate cut’ messaging. Retail sales and industrial production are both expected to show rebounds – which could produce some ‘buy the rumor’ type trades into Friday. Consumer sentiment is expected to remain at high levels (as long as credit is flowing and stocks are near ATHs).
Monday June 10
The JOLTS jobs report (an analyst’s view of how to interpret),  JPY Japan 19Q1 GDP (Sunday) (QoQ e0.4% p0.5%), CNY China Imports/Exports/Trade Balance
Tuesday June 11
The US PPI figure, UK jobs report
Wednesday June 12
Besides Chinese and US inflation prints make this the most important news day of the week. USD US CPI (Core YoY e2.1% p2.1%), CNY China CPI (YoY e2.7% p2.5%), plus EUR ECB President Draghi speech
Thursday June 13
Swiss rate decision. German inflation is the key print of the day. EUR Germany CPI YoY (e1.3% p1.3%). EUR Eurozone Industrial Production (MoM), 12:30 USD US Jobless Claims, NZD Business NZ PMI.
Friday June 14
02:00 CNY China Retail Sales/Industrial Production
02:00 CNY China NBS Press Conference
12:30 USD US Retail Sales (Control Group p0.0%)
13:15 USD US Industrial Production (MoM)
14:00 USD Michigan CSI (prelim) (e98.1 p100.00)
Looking Ahead:

The 2019 G20 Osaka summit will be the fourteenth meeting of Group of Twenty (G20). It will be held on 28–29 June 2019 in Osaka. It will be the first-ever G20 summit to be hosted in Japan

Earnings Calendar


Personal Note:

I will be presenting at the Benzinga Trading Summit next Thursday June 20th – traveling Wednesday – Sunday so my live trading room will be closed W/Th/Fri. I will also be meeting with a few colleagues while in New York. So I will bring back lots of good new trade ideas, techniques and friends!
This gal doesn’t get off the Farm to go to the Jungle very often.  Can’t wait.
Samantha