Thought I’d share with you this morning’s entry to our firm’s market journal:
(Thursday)
are having a strong week thus far, with the S&P up 1%.
Energy has been
screaming higher of late, up 2.8% this week and up over 7% the past month. I
attribute easily half of the latest move in oil to geopolitics, the other half to strong demand and OPEC/Russia’s agreement. The move in energy
stocks suggests that the market sees the price at sustainably profitable levels going
forward. Oil futures are in backwardation but the forward prices are well above
breakeven. Now we look for the extent of the ramp up in North America inspired
by these prices, it’ll be interesting to see to what extent if any it thwarts
OPEC/Russia’s efforts.
industrials are also having a strong week. Both sectors have seen good earnings
results from their constituents; banks are no doubt getting a boost from
recently higher interest rates.
strongly of late as U.S. data has been notably better than Europe’s, in
particular, with higher interest rates adding an extra boost.
morning, the dollar and the interest rate scenario is being turned on its head.
After a below consensus read from yesterday’s PPI (but with overall trend still
toward acceleration), today’s CPI came in below expectations as well (.2% vs
.3% expected); that has bonds (yields lower) and gold rallying hard this
morning — and the dollar is getting absolutely crushed.
All things considered, I, for now, view this morning’s market action as counter-trend for the bond market, more in-range action in gold and, if it persists, a testing of the dollar’s recent breakout. I.e., conditions, as I read them today, continue to lean me toward weaker bonds, weaker gold and stronger dollar on a trend basis going forward (barring geopolitical surprises in all 3 cases).
As for stocks, the
softer tone around trade is huge and is allowing for positive earnings reports
to hold their resulting higher prices beyond the first few hours post
announcement.
not for the trade noise, could’ve been a strong move during March and
April, we should still expect the market to struggle as mid-term elections
approach.
beyond what is likely to be a somewhat difficult (volatile) stretch…