A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Citi chief global economist Catherine Mann made an interesting point about stock prices in a Thursday report (my emphasis),
“We posed the Central Bank dilemma: Ease monetary policy in the hope that this will offset trade uncertainty, bolster sentiment, and thereby support economic activity versus ease policy and witness widening asset market disconnect. We concluded that … additional policy ease would tend toward asset prices rather than benefit global growth or inflation, thus widening disconnects between financial markets and fundamentals. There are many possible measures of financial disconnect – emerging market spreads relative to average, HY [high yield] rising leverage but narrow spreads, and VIX versus MOVE measures of volatility… The important look forward is whether the fundamentals drive the financial markets, or whether the financial markets drive the fundamentals.”
“@SBarlow_ROB C: "The important look forward is whether the fundamentals drive the financial markets, or whether the financial markets drive the fundamentals" – (research excerpt) Twitter
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Michael Darda is the chief economist and market strategist for MKM Partners. Unlike many economists, Mr. Darda is not arguing that ‘it’s different this time’ where the U.S. yield curve is concerned – he is taking it seriously as a recession indicator,
“We continue to believe recession risks for the next 12 months remain elevated given the prevailing (and deepening) inversion in key parts of the Treasury yield curve. Keep in mind that the yield curve was [dismissed] the last three times it inverted on a weekly and monthly average basis (1989, 2000 and 2006)… during 1989 then Fed Chair [Alan] Greenspan believed that there were “distortions” in the Treasury market from the S&L [savings and loan] crisis that likely caused the curve to invert. About one year later, a recession hit. During the year 2000, then Fed Chair Greenspan believed there were distortions in the Treasury market from actual and expected fiscal surpluses. About one year later, the U.S. entered a recession.”
“@SBarlow_ROB Darda: Where yield curve concerned, it's not different this time” – (research excerpt) Twitter
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Wednesday was a bit of an odd trading session for crude. The U.S. Department of Energy reported a much larger decline in inventories than expected but the commodity price refused to respond positively in light of a weakening global economy. This is another sign that for economically sensitive sectors of the market, the U.S. China trade dispute is dominating trading.
“Oil falls as investors weigh a sizable drop in U.S. inventories against the ongoing trade war” – Bloomberg
“ Retailers howl as U.S. trade agency locks in 15% tariffs on September 1” – Reuters
“China hopes U.S. will create conditions necessary for September trade talks” – Report on Business
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Tweet of the Day: “@ReformedBroker You must choose: 30-year U.S. Treasury Bond yielding 1.94% vs Verizon common stock dividend yielding 4.17% *** So tell me…how pessimistic are you?” – Twitter
Diversion: “The Man Who Couldn’t Take It Anymore: “I had no choice but to leave,” General James Mattis says of his decision to resign as President Trump’s secretary of defense” – The Atlantic