Yesterday’s stocks reacted to a raft of overnight foreign economic data that it perceived positively. In this note, I’ll run down the data and my doubts about that reaction. The hits began with China’s Markit manufacturing PMI jumping to 50.5. While the media seems to…
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Investors have been given another slug of wanting housing data this week. First it was building permits which surprised to the downside and today it was pending home sales, which fell 4.9% YoY vs expectations of a 1.8% drop. Both building permits and pending home…
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To the dismay of many observers, US treasury yields have been dead as a doorknob despite the 20% rally in stocks over the last three months. In fact, the US 10-year yield is on the verge of breaking below the 2.56% level it reached on…
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Stocks have been on a tear. Manufacturing has contracted, bringing down GDP and earnings estimates. Was the stock bounce real or just a short covering? Sentiment on stocks has shifted to bullish while sentiment on bonds has moved bearish. In this special video report, CIO Steve…
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The big news of the day relates to the continuation of a trend that has been going on since 2013: the widening of the trade deficit. The trade deficit in dollar terms at $-59.8bn in December and $-622bn for the year broke down to a…
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Credit markets often move before the equity markets, and this can offer helpful information about the near-term path of equity prices. In general, I like to see credit confirming what the equity markets seem to be saying. When credit stalls, like it is now, I…
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Several weeks ago we did some research to find out what a typical rally looks like after a big waterfall-like decline takes place. The takeaway was that the rallies after those waterfall declines have lasted anywhere from 1 to 74 days and have retraced 20-90+%…
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As many commentators have pointed out, the yield curve has developed a sort of humped form in recent months. That has led many to speculate about when the yield curve will invert, foreshadowing a recession. If, as the logic goes, the yield curve is about…
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Knightian uncertainty is named after University of Chicago economist Frank Knight (1885–1972), who distinguished risk and uncertainty in his work Risk, Uncertainty, and Profit: “Uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has never been properly separated…. The essential fact is that ‘risk’ means…
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The slide in oil prices in October accounted for most of the move in 10-Year US Treasury bonds via the inflation risk component of the term premium. The two series are always highly correlated and this is a mechanism through which oil price changes are…
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So here we are, having added 10% to the value of stocks from their Christmas Eve low when we listed a baker’s dozen reasons why stocks could tactically rally from there. We wrote further about the statistical merit to a rally after such an emotional…
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The oversold condition in stocks that has developed over the last several weeks is more than trivial. I highlighted on Christmas Eve the baker’s dozen reasons why equity markets could tactically rally from that point, showing extremes in a variety of indicators. Extremes of the…
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The S&P 500 experienced a waterfall decline in December, something rarely seen. Measuring the decline using a 30-day Wilder Relative Strength Index, it is clear the extremes recently experienced. On Christmas Eve, the S&P 500 punctured 30% on the RSI, something that has only happened…
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Stocks plunging to new lows on the year and to the lowest level since early 2017 is no way to bring in the holidays. Investors are in panic mode, with precious few precedence of this level of sustained selling outside of the 2008 meltdown. But…
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We are quite sure many of our readers are eager to turn the calendar and be done with 2018’s turbulent and unforgiving markets. After all, US stocks have gyrated wildly for the entire year, foreign stocks have gotten absolutely no love, and traditional diversifiers like…
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