The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Walking it back
President Trump said he wasn’t interested in firing Chairman Powell and that he was going to be nice to China and they were going to be nice to us. Markets viewed both those statements as undoing a lot of the damage of late and risk-on became a food fight early. The S&P opened up +125 points and climbed even further in early trading, topping at +182. The index gave back over 100 points over the rest of the day as markets wondered whether the good news was as good as it seemed in the morning. Yields fell some on the back of the Treasury curve and the Dollar rallied again, a sign of some renewed faith in US stores of value. Capital flow was about normal today, but barely, 98%.
The capital that had been frozen, or paralyzed, or stubbornly sitting on the sidelines, appears to have gotten into motion today. Perhaps that’s a sign that normal flows of capital are willing to move around now that the President is backing away from slash-and-burn policy announcements.
I’m not sure this is the beginning of the resumption of the bull market however. The President can change his mind faster than Powell’s term is up and the Chinese trade deal is signed. The economy is suffering damage and we are all waiting for the data to quantify just how much it will be. Until we can measure the economic impacts of this highly uncertain window in time, it’s all feelings and tape-chasing.
That leaves the market in an unstable place. I would not put much faith in today’s levels. Maybe it’s a continuation of the bounce off the April 7th low and the dip-buying bulls will be vindicated yet again. Maybe it’s a bear market rally. In this environment, the old sources for inklings about the next likely move are degraded. It’s more coin-flippy than ever and the fundamental economic foundation is softening.
See you tomorrow.
-Mike
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