Many believe this quarter's earnings results have already been priced into the markets, pointing to the rally late last year into early January. We would not disagree. The market's inability to continue rallying in the wake of these earnings results is a worrisome sign.
Comparing the size of U.S. GDP to various markets
A look at the CoT report from April 27, 2018
Today's topics include quantitative tightening, rising yields, ranking hedge funds, risk-free yields, John Paulson, Switzerland's embrace of cryptocurrencies and the stronger dollar.
The Fed is projecting six more rate hikes by the end of 2019. Risk markets are afraid this will lead to a repeat of the oldest story in finance - too many hikes will invert the curve and cause a recession. There will be opportunities for the Fed to moderate this stance, but so far they have shown no interest in backing down.
A big bump in the pace of core inflation to 2.0% through March 2018 should not necessarily be chased by investors. History suggests large shocks to core inflation are met with muddled to narrower TIPS breakevens in the months following. Whether or not TIPS breakevens can add another 25+ bps of widening will very likely dictate the pace of hikes by the Federal Reserve.
Markets appear to be preparing for the U.S. dollar to continue higher, but without bringing Treasury yields along for the ride. This would favor defensive sectors in U.S. and emerging markets that show weaker ties to the dollar.
Don't forget about roll yields when investing in commodity futures.
Today's topics include 3% yields, the Euro economy, the BoJ & inflation targets, lousy economic projections, Chinese/U.S. spreads, rising crude oil prices, financial vulnerability, fund flows, taxes and initial claims.
We don't see any signs of panic over the 3% threshold in emerging market ETF flows.