Simmering beneath the surface

Simmering beneath the surface

It feels that we are in the second half of the latter stage of the current market cycle.  This is the period when inflation naturally increases; inflation causes the price of commodities to rise even without any additional scarcity.  Near term, oil prices likely head higher. With rising inflation comes rising rates and …….

Donald Trump: “Trade wars are good and easy to win.” “I’m all about trade wars.”

Frederic Bastiat, 1825: “When goods do not freely cross borders, soldiers will.”

Ludwig von Mises: “The philosophy of protectionism is a philosophy of war.”

Alan Greenspan: “Protectionism will do little to create jobs and if foreigners retaliate, we will surely lose jobs.”

Christine Legarde: “Social unrest and protectionism are our two major economic risks.”

Benjamin Franklin, 1776: “No nation was ever ruined by free trade.”

Ben Inker of GMO Research: “As a general rule, when you add the word ‘war’ to your description of an event, it’s a pretty strong suggestion that it is unlikely to be either good or easy.”

That’s enough to be said about trade wars for now.

Now a review of the mixed bag of results from last week.

  • Personal income just met expectations, but the gain of 0.4% is solid.
  • Initial jobless claims declined to 215K, much better than expectations of 230K and a new cycle low. It is the lowest week since January of 1973.
  • Q4 GDP revised higher to an annualized real rate of 2.9%, better than the last estimate of 2.5% and expectations for improvement.
  • Pending home sales increased 3.1%, beating expectations and bouncing back from the January results (revised even lower). The index is still down 4.1% year-over year.
  • Chicago PMI declined from 61.9 to 57.4, missing expectations for a slight increase. This is often an indication of the ISM index to be released on Monday.
  • Consumer confidence softened, although the market is not really treating the near-record levels as “bad.”
    Conference Board 127.7 with 130 prior and forecast.
  • Michigan sentiment 101.4 with 102 preliminary and consensus.
  • Home prices still lag historical growth patterns and measured in real terms, remain 11.1% below the bubble peak.

We have a big economic calendar coming up featuring the employment report for March, the ISM manufacturing and service indexes (both), and auto sales.

There is a bit of FedSpeak. Congress is in recess. Despite this, the Washington circus may well dominate the news – once again. has a good U.S. economic calendar for the week (and many other good features which I monitor each day). Here are the main U.S. releases.

The SPX is once again approaching support. 2530 appears to be the line in the sand. Nice contrarian signal from the CNN Fear & Greed index. Vigilance advised.



A techno fundamental view The Week Ahead - Buy silver, sell gold