Morning Note: A Dangerous Ethos

Per this week’s main message, pundits who believe we’re to revert right back to the inflation setup (none to speak of) of the past several decades point to the signals of a bond market that is anything but a legitimate market/economic signaler these days. It, in a sense, signals whatever the Fed desires it to signal — which would be that inflation this go-round is “transitory” and, therefore, the Fed’s free to print at will, to suppress interest rates ad infinitum and to essentially fund federal deficits as far as the eye can see.

Well, again, I’m certainly open to that (call it a head-fake) possibility, however, as I’ve expressed, the general setup has evolved away from what it’s been these past several decades, markedly in many respects.

As for yesterday’s week ADP jobs number — which offered another I-told-you-so moment for the deflationistas — well, here’s from yesterday’s ISM Services Purchasing Manager’s (PMI) Survey:

“Employment activity in the services sector grew in July after a month of contraction. ISM®’s Services Employment Index registered 53.8 percent in July, up 4.5 percentage points from the June reading of 49.3 percent. Comments from respondents include: “Trying to aggressively fill positions. (However, it is) very difficult to get positions filled. (We are) still using agency clinical staffing. Looks like people don’t want to work in the lower support service areas.” Also: “Demand is up, and it is hard to find employees.””

And here’s from Monday’s  manufacturing PMI:

An overwhelming majority of panelists indicate their companies are hiring or attempting to hire, with about 30 percent of comments — a slight decrease from previous months — expressing difficulty in filling positions. A significant number of panelists note increasing employee-turnover rates,” says Fiore. An Employment Index above 50.6 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.”

To repeat (from yesterday morning’s note):

Presumed noble intentions notwithstanding, and while, indeed, the Delta variant may represent heightened deterrent for the careful would-be job-seeker, aggressive government intervention can’t help but lead to market distortions; labor market included…”

Asian equities leaned red overnight, with 9 of the 16 markets we track closing lower.

Europe’s mostly higher this morning, with 15 of the 19 bourses we follow in the green as I type.

U.S. stocks are trading up to start the day: Dow up 165 points (0.46%), SP500 up 0.37%, SP500 Equal Weight up 0.52%, Nasdaq 100 up 0.34%, Nasdaq Comp up 0.36%, Russell 2000 up 0.96%.

The VIX (SP500 implied volatility) is down 2.5%, VXN (Nasdaq 100 i.v.) is down 1.02%

Oil futures are up 0.19%, gold’s down 0.72%, silver’s down 1.15%, copper futures are up 0.15% and the ag complex is up 0.64%.

The 10-year treasury is down (yield up) and the dollar is up 0.01%.

Led by Viacom/CBS, ALB (lithium), Latin American equities, banks and energy stocks — but dragged by solar stocks, gold miners, water stocks, healthcare stocks, and KRBN (carbon credits) — our core mix is up 0.37% to start the session.

The following from Lasse Heje Pedersen’s instructional book Efficiently Inefficient describes how firms like ours approach the investing process:

“Global macro investors look for opportunities all over the world and in all asset classes, often use long-term, “big-picture” themes to drive positions…”

“Macro investors closely follow central banks, consider macroeconomic links, and incorporate both financial and non-financial information, such as political, technological, and demographic trends.”

Frankly, I couldn’t imagine approaching our task in any other manner. Stock market-centricity — the retail advisor’s ethos — is, in our view, a historically dangerous way to approach the investing process, particularly right here.

Have a great day!

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