Morning Note November 15, 2016
Tuesday, November 15, 2016

 

SPX Flat, Dollar Down, Crude Up

In the past week, the Trump Reflation Surge triggered the worst decline in bonds since 1981, cancelling out nearly $1 Trillion of value across the globe. The trajectory of the UST10Y regaining support at the weekly 50sma (1.782), and imbalancing upside to the 200sma (2.22) in a week is impressive. According to GS’s note, no matter the policy mix of a Trump’s administration, the outcome will be one of slowing economic growth, and the “Reflation Euphoria” will fizzle.

Overnight, the dollar index has hit 22hrs of resistance at the 100 handle, after a +320bps rally in the past four days—steepest since 2009. UST10Y yield stalls with resistance at 2.30, and support at 2.22. Meanwhile, the brunt of the pressure was focused on emerging growth currencies, bonds, and equities.

Besides global dollar shortage & Trump’s Fiscal Stimulus proposal. The dollar has seen demand due to rate hike probabilities >85.1% for Dec’16. Late last night the Richmond Fed President, Jeffrey Lacker, said that in light of the Trump victory ‘if a more stimulative fiscal stance would materialize that would bolster the case for raising rates’ and that ‘as a general matter, doing monetary policy with a more stimulative fiscal outlook usually warrants higher policy rates’. Prior to this the Dallas Fed President, Robert Kaplan (who is a voter next year), said that he had favoured a rate increase at either the September or November meeting and reiterated that he was hopeful that a hike is coming soon (via ZH).

We’re entering a new world of fiscal stimulus and saying goodbye to the days of Monetary Policy only era. Nevertheless, CITI,GS, & SOCOGEN chime in by saying “only source of equity upside has been debt funded buybacks”. So, what happens to debt issuance when rates rise? Opps…Nevertheless, BOFA clarifies the situation with “peak liquidity, peak inequality, peak globalization = peak returns for stocks and bonds in the coming years”. To make matters worse, the Fed is attempting to hike into a terminal declining of US Macro data. The recent inflation is not because of growth, but it’s the fear of massive fiscal stimulus.

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Morning Note November 11, 2016
Friday, November 11, 2016

SPX Down, Dollar Flat, Crude Down

The order of importance: treasury yields, dollar, and equity markets. Post Trump win, the dollar and treasury yields soared making inflation “great again”. The causation is Trump’s fiscal stimulus plan that sent equity markets sky high on dismal treasury auctions of 10y/ 30y, and a global meltdown in emerging market currencies.

More than $1 Trillion was wiped from the value of bonds this week, as treasuries lost the most since 2009. Ray Dalio warns 1% rise in yields would lead to trillions in losses with global debt hitting all time highs at $152 trillion. The situation in the debt market is a `dangerous situation` with the President Elect focusing on pro-growth and inflationary economic policies. The UST10Y has advanced from 1.34 low in June to 2.152 in November signaling a daily golden cross mainly on speculation of Trump’s plan to cut taxes and boost spending which will increase the US budget and produce inflation.

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Morning Note November 08, 2016
Tuesday, November 08, 2016

SPX Down, Dollar Up, Crude Down

Well, that wonderful day is finally here as the eastern states have begun voting for the next President of the United States. If 2012 serves as a roadmap, we should expect the election results around the 11pm est. hour. With the UK referendum vote still fresh in our minds, the similarities of establishment vs. anti-establishment are striking in the US election.

We polled our audience members (Gender: 84%M/16%F, Net worth: $250k > 40%, Interest: Business and Finance 91%, Age: 25-50 90%) of who will win the US Presidential Elections in the overnight session.

Results: Clinton 36%, Trump 64%

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Prior session, Real Clear Politics released their electoral vote map indicating 272 Clinton vs. 266 Trump. The recent momentum in Trump’s camp narrowing the spread has been impressive due to Comey re-opening the Clinton email scandal case. Over the weekend, Comey closed the email case for the second time with limited impact on polling datasets.

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LA TIMES: CLINTON 43.2%, TRUMP 48%

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Morning Note November 07, 2016
Monday, November 07, 2016

SPX Up, Dollar Up, Crude Up

US index futures, Asia and European regional equity indexes are modestly higher following the second clearing of HRC by the FBI. Two weeks ago, FBI head Comey dropped a bombshell letter to congress reopening the Hillary Clinton’s email scandal,  after 650k emails were found on Anthony Wiener’s laptop. Immense pressure was put on Comey internally and publicly, which it seems he has folded to the establishment. Rumors have floated in the alternative news space of the NYPD to pick up the baton if the FBI fails to do so. Erik Prince the founder of Backwater private military contracting group says, NYPD READY TO MAKE ARRESTS IN ANTHONY WEINER CASE. Overnight, Wikileaks released another 8.2k emails from the DNC hack; reveals collusion between CNN and Democrats.

Here are the latest polls:

  • US IBD/TIPP National Poll: Clinton 41% Trump 43%
  • CLINTON 44%, TRUMP 41% IN BLOOMBERG POLITICS NATIONAL POLL
  • NBC/SurveyMonkey pre-election results: Clinton 47%, Trump 41%, Johnson 6%, Stein 3%
  • NEW: Hillary Clinton leads Donald Trump by four points in latest @ABC News/WaPo tracking poll

LA TIMES: CLINTON 43.2%, TRUMP 48%

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Morning Note November 04, 2016
Friday, November 04, 2016

SPX Down, Dollar Flat, Crude Down

Most regional equities in China, Europe, Japan, and US are in the red this morning following an uptick in currency, equity, oil, and treasury volatility. Oil on the week has widely declined -800bps following bearish US fundamentals and a faltering OPEC “proposal”. Investors have spent the past two weeks deleveraging ahead of the US presidential election next week,  due to various mainstream polls indicating election spread is tightening.

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Morning Note November 03, 2016
Thursday, November 03, 2016

 

SPX Up, Dollar Flat, Crude Up

Overnight all global regional equity indexes are mixed. US equity futures sell in the Asian trade, but recover in a 3:30am ramp at EU market start. Ever since SEC sent a formal inquiry to GS about end of day rebalancing ie the 3:30pm ramp. US equity indexes have been on a decline. Tightening in the US Presidential race has been a major factor in the recent global ‘Value At Risk – VaR’ shock.

Turbulent session overnight for /ES liquidating -49bps in late night hour following Bret Baier: FBI Sources Believe Clinton Foundation Case Moving Towards “Likely an Indictment”. Also, Doug Hagmann: Insider: NYPD/FBI Found Sex Blackmail Network On Weiner’s Computer. Steve Pieczenik a former Deputy Assistant Secretary of State who served the presidential administrations of Gerald Ford, Jimmy Carter, Ronald Reagan and George H.W. Bush has publicly came out stating that a US intelligence agencies counter coup is underway to stop the Clintons from receiving power. Wow, this sounds like a SPY-Movie.

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Morning Note November 02, 2016
Wednesday, November 02, 2016

SPX Down, Dollar Down, Crude DOWN

Overnight Global Stocks in all regions and US futures are widely under pressure following mainstream polls suggesting tightening in the US presidential race. Investors have started to deleverage risk with safe haven flows into precious metals, and at the midpoint of prior session bid in bonds. The Vanguard Total World Stock Index -60bps with a bearish piercing pattern on an eight-month timeframe. The main event today will be FOMC 2pm est. outcome with expectations of unchanged looking for hints for Dec’16.

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Morning Note November 01, 2016
Tuesday, November 01, 2016

SPX Flat, Dollar Down, Crude Flat

Overnight, the continuation of the global bond selloff was catalyzed by unchanged BOJ policy and strong Chinese PMI data. Speculation of major central banks tapering has sent the UST10Y from 1.34 mid-summer ‘16 to 1.87 last week. In fact, the US Federal Reserve has been tightening for two years shrinking the monetary base by letting old debt securities roll off. Regional future equity indexes in the US are relatively flat in the 7am hour. Across the pond in the EU, regional equities (CAC, DAX, UKX) are mixed following Standard Chartered Bank missing earnings due to revenue decline. Regional equities in China (HKG33, SHCOMP) were modestly higher following strong Chinese PMI reports. Regional equities in Japan (Nikkei) are flat following unchanged BOJ policy.

In recent sessions, WTI has declined -697bps to the mid-46 handle following speculation of an OPEC deal unwinding. Prior session, Genscape Cushing inv +585K for week ended 10/28. Looking ahead, API crude oil inventories will print at 4:30pm est. /RBOB has jumped more than 15% overnight following Colonial pipeline explosion. So, what happens next?

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Morning Note October 28, 2016
Friday, October 28, 2016

 

SPX Up, Dollar Flat, Crude Down

SPX futures are marginally higher following the 3:30am ramp, EU equity indexes are flat, and Asian stocks are widely down following a global bond selloff on speculation of major central bank tapering. US Stocks have retreated this week after a disappointing earnings report for Apple and Amazon. US Dollar shortage continues following Dec’16 rate hike probabilities >73%, UST10Y probing 1.87, & global tapering concerns of QE.

Breaking at 8:30am- Growth Rate QoQ Adv at 2.9%

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Globally, bond markets are selling off forcing yields to spike. In the US, UST10Y probes 1.87 handle +8.31% on the week, DE10Y probes out of the negative territory at .180, and the JP10Y sits in negative territory -.046. The bond sell off started in small increments in September after the BOJ ditches QE for “yield curve control”. Frankly, the monetary policy era only theme is sadly over after a full-blown decade of negative to zero lower bound rates, and money base expansion of extraordinary proportions failing to produce the results that were promised. Bonds worldwide are on the course for their worst week since the taper tantrum of 2013.

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Morning Note October 27, 2016
Thursday, October 27, 2016

 

SPX Up, Dollar Down, Crude Up

Asia and European stocks are mixed while SPX futures rebound on mixed earnings, UST Yields surging, dollar strength, and rate hike probabilities increasing. Global 10Y Bond yields are notably higher in all regions with the UST10Y at 1.83.

Prior session, the two main drivers in US stocks were EIA drawdowns and the Apple (NYSE:AAPL)  earnings miss. Another busy day with 62 SPX500 companies scheduled to release their latest quarterly earnings. Most notable is ConocoPhillips (NYSE:COP) , Ford, (NYSE:F)  and UPS (NYSE:UPS).

US Event Calendar

  • 8:30am: Durable Goods Orders, Sept. P, est. 0.0% (prior 0.1%)
  • 8:30am: Initial Jobless Claims, Oct. 22 (prior 260k)
  • 9:45am: Bloomberg Consumer Comfort, Oct. 23 (prior 41.3)
  • 10am: Pending Home Sales m/m, Sept., est. 1.0% (prior -2.4%)
  • 10am: Freddie Mac mortgage rates
  • 10:30am: EIA natural-gas storage change
  • 11am: Kansas City Fed Manufacturing Activity, Oct., est. 3 (prior 6)
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