The market had to hang onto gains after a strong rally lost steam halfway through the session on Friday. I am not reading much into it other than empty trading floors along with packed highways. Folks are hitting the road for long weekends and vacations.
Anxiety isn’t going on vacation, but we are learning to live with these headlines and the never-ending-negative scuttlebutt that is part and parcel of the resistance to this administration. Remember, it wasn’t that long ago when Americans were celebrating so-called “green shoots.” Now, the great economic news is greeted with skepticism and doubt.
Energy was the big winner last week as crude surged to a multi-year high.
+0.21% | ||
+0.26% | ||
-0.04% | ||
+0.81% | ||
+0.02% | ||
+0.29% | ||
+0.35% | ||
+0.45% | ||
+0.31% | ||
+0.10% | ||
+0.16% |
There was rotation into more oversold areas such as materials and industrials, which has been a big disappointment.
I have to say, with all the negativity, I think the market has held up nicely. The fact is, there has been an amazing rally, and this consolidation phase has been reasonable, even if it was longer than usual.
Market breadth continues to be negative; of course, the inability to sustain gains into the close was also a yellow flag.
Still, for all the negative news and difficult sessions, June was a wash in the end.
Recession Calling?
I’m sure there is a lot of the selling associated with the tightening yield curve. When the two-year yield is greater than the ten-year yield, it’s considered inverted, and it’s been a reliable harbinger of recessions. There are also reasons why this could happen, but there is no doubt, big money is laying off risk.
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What’s ironic is that the first big downside challenge of the stock market in 2018 came courtesy of the ten-year yield going too high.
You got to love it.
Consumers Spending & Business Investment
I continue to say: look at valuations, which are very attractive, especially against the backdrop of a strong economy where business investment is growing, and consumers are spending.
It’s not just retail that has made a remarkable rebound in brick-and-mortar, but homebuilder orders and backlogs are also impressive.
Just consider the holiday this week that will see a record 46.9 million travelers, including 39.7 million hitting the road. A couple of weeks ago, headlines suggested $3.00 a gallon for gasoline would destroy the economy.
It’s down a little since then, but it’s clear that when we feel flush, nothing can stop us from watching fireworks with Grandma on the Fourth of July.
The media will jump all over Canada’s implementing up to $16 billion in retaliatory tariffs against our retaliatory tariffs to scare Americans, as if it’s been snatched from the treasury department. I agree with President Trump. America should easily win a trade war, but his administration will surely lose the media battle, which is unfortunate.
Should the United States Stay in the World Trade Organization?
It’s interesting that so many people point to a huge 85% winning percentage for America and a low 65% winning percentage for Mexico (although combined you must wonder which nations are losing these disputes). But my question is what are we winning?
The World Trade Organization is a joke, where members self-identify and pledge, but are not obligated to live with trade settlements. Consider this, China says it’s in the same “emerging growth” basket as the nation of Togo.
- China 2016 GDP $11,200,000,000,000
- Togo 2016 GDP $4,400,000,000
Should the United States Exit WTO?
We continue to fight the same fights over and over, while American jobs fade, and it’s harder for U.S. companies to compete in other markets.
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