Our proprietary macro index improved by 5.77 points this week to -38.46. While a long way from positive, and still screaming deep recession, that’s a far cry from the -82.69 it scored back on June 1st. 




The two areas that showed score-changing improvement were the ISM services survey and Global PMI. Both being producer sentiment gauges.


With regard to the ISM survey, while a jump to 57 looks beautiful on the graph, it merely represents expansion relative to the prior month. Imagine how negative I’d sound herein if the gauge — given the state of conditions a month ago — had scored under 50 (denoting contraction vs previous month).


While not as dramatic, note the bounce back to above 50 (white circle) early in the ’08 recession, before rolling over as producer sentiment began to reflect the then economic reality:





As for the Global PMI, well, it’s scored the same way, and, yes, despite the look of the graph below, it’s 47.7 says things actually got worse (in the opinion of global purchasing managers) month-on-month. I’ll leave how negative a sign that is to your imagination:





Another area worth noting is commodities. They continue to rise, which scores positive in our index. And we like it very much as they now represent nearly a fourth of our core portfolio exposure (an area we’re looking to incrementally add to going forward on the coming pullback(s) we’re anticipating).


Unfortunately, however, the kind of inflation we — and commodity prices — see brewing is not necessarily the “good” kind, as I mentioned in this morning’s note.


Bloomberg Commodity Index:



CRB Raw Industrials:



Copper:



Sadly, copper’s move has been exaggerated by COVID devastating the workforce among the miners in Chile — by far the world’s largest producer.


In closing, here’s a little stock market stuff (from me) from our inner-office research chatroom this morning:

According to the headlines this morning, Trump just said phase-2 trade deal ain’t happening (btw phase 1’s commitment hasn’t even come close to happening), and that the us/china relationship is severely damaged. With regard to tech, I can’t over-stress how important the Chinese market is… BTW, a year ago this news would’ve devastated the stock market (and rightly so)… Today, not even a blip, in fact the market’s rising as I type… Stocks are as disjointed from reality as much as I’ve ever seen… Despite the incredible 1.6 trillion the treasury has loaded the TGA with to juice the market between now and you know when, this is still about as risky as it gets for stocks…

With regard to VXN (also mentioned in this morning’s note):

“…it’s remarkable how a rising vxn, against a rising nasdaq occurs at tops! Every upward-sloping line highlighted under the blue (vxn) began before the Nas-100 rolled over:”

While the market is dynamic, and the future cannot be known with certainty, what can be known with certainty — when you do the work — is the prevailing risk. And, again, while the resources brought to bear from the establishment may justify some serious short-term bullishness around stock prices — there’s tons of it (risk) right here…


Have a great weekend!
Marty