And the Dow Dow Dow went Down Down Down, A Rush of Traders Selling

 

This is the last full week before the 4th of July holiday when we will see a significant drop in volumes with lots of traders (and traders controlling the algos) on vacation. This week is supposed to be quiet but that can always change with a single tweet. On the economic front, this week we have Consumer Confidence, and US GDP. Traders will also be closing the 2Q at the end of the week.

 

GDP Final Release: On Thursday (6/28), we get our third and final release of US GDP for the 1st quarter. We get 3 releases, Advance, Preliminary and Final. The first release is the most impactful. However, if a line item were to surprise in the Final reading, the markets can react accordingly. The 2nd release had the US economy growing at 2.2%, down from 2.3% in the 1st reading. If this reading were to be even higher, we can expect to see equities go higher. If the report comes in substantially weaker, expect equities to fall. 

Bank of England Stress Tests: Bank of England Governor Mark Carney is expected to announce the results of Bank Stress Tests. If the banks pass with flying colors, we will see equities go higher fueled by the rise in bank stocks. British Sterling would likely go higher. If individual banks were to fail, we would like see their stock tank.    

Consumer Confidence: More soft data which seems to be down from previous month’s readings. On Tuesday (6/26) Consumer Confidence is released. Investors will be looking to see how much of an effect the rise in oil prices has affecting consumer’s willingness to spend. A scale back in this reading could see stocks slide.

And the Dow Dow Dow went Down Down Down: With potential trade worries, the Dow has finished down 8 of the last 9 days. Unless we see olive branches extended from the EU or China, we will continue to see the broader markets pull back. Any new announcements of potential tariffs will help sink the markets even further. Last Friday, the Dow avoided its first 9 day losing streak in 40 years.

More Tariffs: Last Friday, President Trump threatened European automakers with a 20% tariff if the EU does not rescind the tariffs they put on different US products such as Levi Jeans, Kentucky Bourbon and Harley Davidsons. From the Tweet (yes, Tweet, cause that is how a US President communicates today), European autos went down on the news. Investors will be listening to the latest tariff threats to see which industry could get hit next.

Will Tariffs Nip the Tip of the Tax Cuts

 

We have a big week ahead with the summit between Kim Jung Un and President Trump. The Federal Reserve, Bank of Japan and ECB are also all meeting. Additionally, investors will be watching the latest headlines from the week of G7 meetings. On the economic calendar, we have CPI, Retail Sales and PPI.

 

North Korea: On Tuesday (6/12), the summit between North Korea’s leader Kim Jung Un and President Trump is set to take place in Singapore. Headlines out of the summit could potentially move markets. If things go well, the market could rise. If it all goes to crap, the markets could fall sending investors into safe havens such as Treasury’s, Gold and the US Dollar. Oil could go up also. Currently Kim Jung Un is staying at a hotel on Orchard Road. If he stops at nearby Orchard Towers and visits the 4 floors beforehand, the summit will likely go positively. 

Federal Reserve: On Wednesday (6/13), the Fed will release a statement where everybody will be waiting to see if the Federal Reserve decides to raise interest rates again. The announcement will also be followed up by a press conference. Right now, the markets ae expecting the Fed to raise rates if we have any chance of 4 rate hikes this year. So far we have only seen 1 rate hike back in March. If the Fed does raise rates for the second time in 2018, we can expect to see significant volatility following the statement release. Some of the results of an interest rate increase include a strengthening in the US Dollar, a spike in Utilities & Financial companies, a weakening of foreign currencies, oil and metals. We would also see mortgage rates go up as Treasury yields will increase. No matter what happens, savings rate at the banks will still stay at .001%.

CPI: Also on Tuesday (6/12), CPI is released. Should CPI come in stronger than expected, it would signal that the consumer is not be affected by the higher oil prices or the potential tariffs on certain products. If it comes in weaker than expected, investors will blame companies in fear of the tariffs.

Italy: The society that brought us the Roman Empire now can’t form a government or come to unity with its surroundings (the European Union). Investor’s will be watching the latest headlines as they try to form a government. The more Euro centric picks in the government, Italian yields will drop and the Euro will get stronger. If they pick representatives that would ultimately leave the EU, expect the Euro to drop and Italian yields (especially short term ones) to rise.

ECB Press Conference: On Thursday (6/14), Super Mario will have a press conference on the ECB’s latest efforts to end their bond buying program (No more free money). Any pull back or exiting announcement would see a strengthening of the Euro and see Euro stocks rise as they feel confident they can stand on their own 2 feet. If the markets believe they can’t stand on their own with an announcement of the ending of bond buying, expect stocks to fall. 

Bank of Japan: On Friday (6/15), the Bank of Japan will release a policy statement followed by a press conference. Right now, the BoJ is considering cutting inflation forecasts. However, with the BoJ continued to buy Japanese government bonds, we are likely not to see a strengthening of the Japanese Yen any time soon.

Stars and Stripes Forever. Hopefully not Forever

Welcome back. As Memorial Day weekend in the US is the official start of summer, we should start to see volumes in the stock markets head lower for the next few months. On the economic front, this week we have Consumer Confidence, the Unemployment Rate, Non-Farm Payrolls and Average Hourly Earnings.

 

Holiday, Celebrate: Markets will be closed in the US on Monday (5/28) for Memorial Day. Markets in the UK and in China will also be closed for their respective holidays on Monday (UK Spring bank Holiday, China Dragon Boat Festival). When trading does resume, expect volumes to be lower as traders and quants are still recovering from their BBQ hangovers. Individual stocks could potentially see outsized moves if they have a lack of liquidity.

Non-Farm Payrolls & Unemployment Rate: Non-Farm Payrolls, the Unemployment Rate and Average Hourly Earnings for May are scheduled to be released this Friday (6/1). Should the figure show that the economy created more jobs than expected, or if average hourly earnings jumped higher, we will likely see the markets go higher, the US Dollar go higher and oil go lower. Should these numbers disappoint, the markets will likely go lower along with the US Dollar. If the number is strong, we could see a selloff in Treasury’s sending the yield back up.

Consumer Confidence: On Tuesday (5/29) Consumer Confidence is released. Investors will be looking to see how much of an effect the rise in oil prices has affecting consumer’s willingness to spend. A scale back in this reading could see stocks slide.

Oil: Last Friday (5/25), we saw headlines that suggested OPEC and Russia could increase supply sending the prince of oil lower. Before that, the price of oil has been hovering just below the $80 threshold, should we see any additional geopolitical concern in one of the oil producing countries, we could see Brent push above this level. With these levels, we could see stocks (outside of energy companies) fall with the additional expense especially transportation companies.

North Korea: The on again off again summit headlines could see markets bounce as we witnessed last Thursday when the markets went down over 1% on the headline that President Trump was cancelling the meeting with Kim Jung Un. The latest headlines now have potential sanctions on North Korea which could be delayed as the US sees if the summit is still on for June 12th. Should we see that they are making progress towards scheduling a meeting, the markets will go up. Should we see an even bigger falling out between Little Rocket man and the Dotard (as they called him once), the markets may go lower.

Italy: Italy is trying to form a government and how that turns out has consequences for the markets. So far it hasn’t been going that well sending European stocks lower and weakening the Euro. The best indicator of how this is going is watching Italian Bond yields. The closer they are to finding a solution, or a Euro centric coalition bond yields drop. The farther away they are or the government will be going more Euro sceptic, bond yields spike. On Friday (5/25) Italian 2 year yields had their largest 1 day rise in 5 years meaning things are not going so good.

I See Bond Yields Arisin, I see Trouble on the Way

Looks like we’re in for nasty weather. Hopefully, the Fed will save the day.

 

Investors will watch the latest on Treasury yields climbing above 3% and see how much higher they could climb, especially with the Federal Reserve statement this week. Traders will also be watching the latest out of earnings season. On the economic front, we have Crude Inventories, Manufacturing PMI, the Unemployment Rate, Non-Farm Payrolls and Average Hourly Earnings.

 

Treasury Yields: Last week saw 10 year Treasury yields climb above 3% for the first time in 4 years, which help to send the markets down over 1% over potential increases in borrowing. Investors will watch to see if yields continue to rise which would be a headwind for potential growth, sending markets lower. But since corporations used the tax cuts to repatriate money to go pay down debt and haven’t been issuing any bonds anymore, it’s sort of a surprise that the headlines would cause the drop.  

Federal Reserve: On Wednesday (5/2), the Fed will release a statement where everybody will be waiting to see if the Federal Reserve decides to raise interest rates again. Right now, the odds are very low for the Fed to raise rates as we have already seen 1 interest rate raise this year. They are also expecting 3 rate hikes for the year. If the Fed does raise rates for the second time in 2018, we can expect to see significant volatility following the statement release. Some of the results of an interest rate increase include a strengthening in the US Dollar, a spike in Utilities & Financial companies, a weakening of foreign currencies, oil and metals. We would also see mortgage rates go up as Treasury yields will increase.  If the Fed announces that there could be a 4th rate hike this year instead of 3, while not raising rates at this meeting, the points just mentioned could also happen. This statement will not be followed by a press conference.

May Day May Day: Banks across Europe (but not including the UK) will be closed on Tuesday (5/1) for Labor Day or May Day as it is also known. Banks in China will also be close for Labor Day. Japanese banks will be closed on Thursday (5/3) for Constitution Day and on Friday (5/4) for Greenery Day. Since it’s in the middle of the week, markets will likely not see outsized moves the day before or after the holiday in their respective countries, and the rest of Europe. 

Oil: With oil in the forefront as it trades at 4 year highs. Traders will be watching the latest Crude oil Inventories release on Wednesday (5/2). Should inventories increase in the latest reading, we can expect to see the price of oil go down. Should we see inventories draw down more than anticipated, we can expect to see the cost of oil to go up. Energy companies will trade in line with the move in oil while transportation companies will trade inversely with the move. So if the price of oil goes up, transportation companies move lower. Markets will also watch the latest rhetoric out of the White House on the Irn agreement. If the deal disappeared and sanctions went back on, oil would be taken off the market pushing the price of black gold higher.

Non-Farm Payrolls & Unemployment Rate: Non-Farm Payrolls, the Unemployment Rate and Average Hourly Earnings for April are scheduled to be released this Friday (5/3). Should the figure show that the economy created more jobs than expected, or if average hourly earnings jumped higher, we will likely see the markets go higher, the US Dollar go higher and oil go lower. Should these numbers disappoint, the markets will likely go lower along with the US Dollar. Economists will also be looking for any signs that last year’s tax cuts have increased wage growth, or if the savings all just went into dividends and share buy  backs. Like in previous months, the Unemployment Rate may drop but average hourly earnings will continue to stagnate as additional part time workers at Amazon will only be paid minimum wage until a robot can do it for cheaper.

Earnings: Earnings continues with 143 S&P 500 companies and 5 Dow components scheduled to announce earnings this week. So far, 267 S&P 500 companies have announced earnings. Traders will continue to see individual stocks have huge price swings if a company’s earnings outpaces or fall short of what the street expected. According to Thomson Reuters I/B/E/S, we have now seen 53% of S&P 500 companies report 1st quarter earnings so far. Of them, 74% reported revenue above expectations while 79% have reported earnings above expectations. This week has some heavy hitters including McDonalds, and Apple.

 

Summer is Coming

 

We have a big week on the central bank front with statements from Bank of Japan and the European Central Bank. Earnings season also will keep traders busy this week. On the economic front, we have US GDP and Durable Orders.

 

Earnings: Earnings kicks into high gear with 181 S&P 500 companies and 12 Dow components scheduled to announce earnings this week. So far, 87 S&P 500 companies have announced earnings. Traders will continue to see individual stocks have huge price swings if a company’s earnings outpaces or fall short of what the street expected. According to Thomson Reuters I/B/E/S, we have now seen 17% of S&P 500 companies report 1st quarter earnings so far. Of them, 71% reported revenue above expectations while 79% have reported earnings above expectations. This week has some heavy hitters including Coca Cola, Verizon and Microsoft.

Bank of Japan: On Thursday (4/26), the Bank of Japan will release a policy statement followed by a press conference. As the bank keeps falling short of its inflation target of 2%, we are likely to hear a continuation of an easy monetary policy (ahem free money) where we will likely see markets in Japan and around the world increase. Any pull back in stimulus would likely see a jump in bond yields and a strengthening of the Japanese Yen.

GDP First Release: On Friday (4/27), we get our first release of US GDP for the 1st quarter. We get 3 releases per quarter, Advance, Preliminary and Final. The first release is the most impactful. If the reading comes in above 3%, which is Trump’s target to get the economy moving, expect to see markets increase. There is always the wildcard of a lackluster reading from the extremely cold winter (which will also be used an excuse) which could disappoint the street, sending markets lower.

ECB Interest Rate Statement: On Thursday (4/26), Super Mario Draghi will be speaking at the ECB’s press conference to announce their interest rate statement. Last week, Super Mario admitted that Euro area growth cycle may have peaked which sent the markets lower. As the ECB was supposed to announce the end of their bond buying program in the next few months, a reversal of tightening could potentially see markets rise globally.  However, the near term knee jerk reaction has been markets falling and the Euro weakening.

Oil: Last week, oil hit a 4 year high as we saw Brent touch $74 per barrel after larger than expected draw downs in global supply. Saudi Arabia also mentioned that they would be happy if crude were to reach $80 or $100 per barrel. Should we see oil continue to increase, expect energy companies to rise and transportation companies will fall as oil is a big part of their expenses. A significant increase in oil could also slow economic growth and act as a tax (So much for that tax savings).

Manufacturing PMI: PMI readings from across the globe are also due out this week. Traders will watch these readings as potential weak readings could cause central banks to take further steps to stimulate their respective nation’s economies. Lately these readings have been slumping so the latest readings could be the result of central banks tightening monetary policy.

WildCard: Geo politics can always rear its ugly head in at any time on the latest headlines to come out of the Trump administration. Any headline on Michael Cohen, the Mueller investigation or changes to President Trumps cabinet can roil markets and cause volatility on the headline.

Who Starts a Trade War With a Country They Owe $1.17 Trillion to?

 

Investors will continue to listen to the war of words between Trump and China on a potential trade war. On the economic front, we have CPI, University of Michigan Investor Sentiment and PPI.

Earnings: Earnings start to rev up towards the end of the week with JP Morgan and Wells Fargo scheduled to announce earnings before the open on Friday (4/13). So far only 23 S&P 500 companies have announced earnings and this week only has 6 S&P 500 companies scheduled to report. Traders will continue to see individual stocks have huge price swings if a company’s earnings outpaces or fall short of what the street expected.

Libor: The news hasn’t been following this enough but LIBOR continues to rise, unlike Treasury yields which have recently declined after the selloff back weeks ago. The 3 month rate has now risen to 2.33%, moving significantily higher than the Fed with interest rates. Investors will watch to see if Libor continues to increase considering $300 TRILLION in debt instruments are based on LIBOR. It is already starting to hurt Japan’s appetite for foreign assets as it becomes more expensive to hedge dollar denominated investments.

1,2,3,4 I declare a trade war:  The latest comments from President Trump and China continued to hurt the market as investors wait to see what a trade war may look like, and how China may react. The broader market sell off last Friday afternoon did not help. The larger the war of words becomes or the additional announcements of products, the more the broader markets will push lower.

FOMC Meeting Minutes: 8:01, 8:02, 8:03 (Can someone please find me for me the Youtube link from Married with Children of Jefferson Darcy saying this). The latest Fed meeting minutes are scheduled to be released on Wednesday (4/11). Investors will be looking closely at the language of the minutes to see what may have changed from the previous FOMC meeting which saw an interest rate hike. Investors will also be looking for additional details if the increase in Treasury yields is impacting their time line to increase interest rates and to normalize the Fed’s balance sheet.

Central Bank Presidents Speak: This week has speeches from the ECB President Super Mario Draghi, Bank of England Governor Mark Carney and Bank of Japan Governor Haruhiko Kuroda. Investors will be listening to their speeches to see if any changes to monetary policy may be on the rise which would increase volatility in the near term.

Celebrity Apresident: Investors and the world will continue to watch to see who will be the next one voted off of Celebrity Apresident. On the hot seat this week is the EPA chief Scott Pruitt. Most cabinet resignations or firings have not meant anything to the stock markets. However, if say White House Chief of Staff John Kelly were to resign, markets could tank again as they see him keeping Trump in line.

How Far Away Are We from GAME OVER

Investors have a relatively quiet week for the first week of the 2nd Quarter. On the economic front, we have Manufacturing PMI, the Unemployment Rate, Non-Farm Payrolls and Average Hourly Earnings.

Non-Farm Payrolls & Unemployment Rate:  Non-Farm Payrolls, the Unemployment Rate and Average Hourly Earnings for March are scheduled to be released this Friday (4/6). Should the figure show that the economy created more jobs than expected, or if average hourly earnings jumped higher, we may see the markets go lower as we expect inflation to climb higher and Treasury yields spike higher. The US Dollar would also go lower along with oil on decreased demand. Should these numbers disappoint, the markets may go higher. Additionally, as in previous administrations, spikes in the Unemployment rate or not enough jobs being created will be blamed on the winter weather. In this instance, the multiple Nor’easter’s in the Northeast.

Libor: The news hasn’t been following this enough but LIBOR has risen for 37 straight days, unlike Treasury yields which have recently declined after the selloff back weeks ago. Investors will watch to see if Libor continues to increase considering $300 TRILLION in debt instruments are based on LIBOR. So all those variable interest rates students have on their student loan debt are going to get screwed even more, extending their period to paying them back to way passed when their children go to school. 

Start of 2nd Quarter: Monday starts the 2nd quarter after seeing the first quarter saw the first down quarter for the S&P since 2015 ending a 9 quarter winning streak. Investors will watch to see if stocks can rebound after the lackluster quarter.

Manufacturing PMI: PMI readings from across the globe are also due out this week. Traders will watch these readings as potential weak readings could cause central banks to take further steps to stimulate their respective nation’s economies.

Celebrity Apresident: Investors and the world will continue to watch to see who will be the next one voted off of Celebrity Apresident. Last week, it was the head of VA, the last one to resign or be fired. Outside of Gary Cohen, most have not meant anything to the stock markets. However, if we were to see somebody such as the Fed Chair or the newly appointed Director of the National Economic Council, Larry Kudlow, do an about face, markets could tank again.

1,2,3,4 I declare a trade war:   The latest comments from Wilbur Ross have hurt the market as investors await to see what a trade war may look like, and how China may react. If one of those options were to dump Treasury’s and replace them with another currency, its GAME OVER for the US. China has mentioned they will unveil tariffs on US food imports including pork, nuts, wine and fruits, but we will wait to see what may be next. Such firms that export from the US these respective foods will see their stocks affected negatively.

Easter Monday: Markets are closed in the Europe Monday (4/2) for Easter Monday. The US and Canada will reopen as banks in the US follow a depression era law (another dumb law that hasn’t been updated in forever, shocker) that states that banks cant be closed more than 72 hours in a row. Banks in Europe will be closed for a 4-day weekend. If you live in Norway, for some reason, you get a 5-day weekend. Outside the exorbitant high taxes, let’s be like Norway.

Tomb Sweeping Day: This week’s unusual bank holiday comes to us from China. On Wednesday and Thursday (4/3 & 4/4) (2 days???), Chinese markets are closed for Tomb Sweeping Day. So as you sit at your desk wishing for a bank holiday, here is one that has a custom of (besides the obvious of cleaning a tomb) flying a kite.

1, 2, 3, 4, I Declare a Trade War

nvestors will be watching the latest rhetoric out of the White House as President Trump is scheduled to sign tariffs on steel and aluminum this week. We also have a statement from the Bank of Japan where they may announce that they are taking away the punch bowl (a significant change to monetary policy.) On the economic front, we have Manufacturing PMI, the Unemployment Rate, Non-Farm Payrolls and Average Hourly Earnings.

 

Tariffs: I’m not really sure how having tariffs for goods imported into the US is a good idea. We don’t live in a bubble where the other side won’t take counter measures, but that is what is likely to happen after President Trump is to officially announce tariffs on imports of aluminum and steel. The markets reacted accordingly and dropped. Investors will watch to see if certain countries announce counter tariffs to offset what President Trump announced. Whatever they announce, we can expect that company or sector to potentially take a hit. If China wants to end this ridiculous rhetoric, they could just say they are going to stop buying US Treasury’s, and that would stop the tariffs in its tracks.    

Bank of Japan: On Thursday (3/8), the Bank of Japan will release a policy statement followed by a press conference. The Bank of Japan Governor Haruhiko Kuroda may announce an exit from monetary stimulus as early as 2019. If we see an announcement to dial back its huge stimulus program (ahem free money) we will likely see markets in Japan and around the world fall. The Bank of Japan bought assets that were equivalent to almost 1 years’ worth of Japan’s GDP. (Imagine the Fed instead of just buying MBS and Treasury’s bought $10 trillion USD worth of US stocks) Should that disappear, we are likely to also see a jump in bond yields and a strengthening of the Japanese Yen.   

Non-Farm Payrolls & Unemployment Rate: Change is not good. Non-Farm Payrolls, the Unemployment Rate and Average Hourly Earnings for February are scheduled to be released this Friday (3/9). Should the figure show that the economy created more jobs than expected, or if average hourly earnings jumped higher, we may see in this instance the markets go lower as we expect inflation to climb higher and Treasury yields spiking higher. The US Dollar would also go lower along with oil on decreased demand. Should these numbers disappoint, the markets may go higher. Additionally, as in previous administrations, spikes in the Unemployment rate or not enough jobs being created will be blamed on the winter weather.  

So Many PMI readings:  Flash Manufacturing PMI readings from across the globe are due out this week. Traders will watch these readings as potential weak readings could cause central banks to take further steps to stimulate their respective nation’s economies.

WildCard: With so many people leaving the Trump administration, none really matter to the stock markets except 1, Gary Cohen. Gary Cohen is the head of President Trump’s National Economic Council. He was a big driver of the tax cut but was also very vocal about not having a tariff. If Cohen becomes fed up with everything (like every other person in Celebrity Apresident), he may leave the administration. If this were to happen, we will likely see the broader markets tank significantly as the Goldman alum brought a lot of confidence to the markets as to Trumps fiscal policies.

Did President Trump See his Shadow Like Punxsutawney Phil?

And we’re back. In America, Happy National Hangover Day. Investors will look to see if rates continue to rise. On the economic front, we have a quiet week with Crude Oil inventories.

Interest Rate arising: Last week saw the benchmark 10 Year yield rise to 2.85%, the highest level in 4 years. With the sell-off in Treasuries, interest rates continued to rise as investors expect inflation to rise as the economy gets better. So now companies would have to spend more to borrow money which pushed the broader markets to have its worst week in 2 years. If interest rates continue to rise, we could continue to see a pullback in the broader markets. The further the slide, we have the potential for the Fed to intervene and announce some more QE Infinity (which they would deny, but who are they kidding?)

Another Potential Shutdown, Take 4: After briefly shutting down the government for the weekend 3 weeks ago (which nobody seemed to notice), investors will yet again be watching the latest on the potential government shutdown.  The deadline for the government budget, which has already been kicked down the road 3 times, is set for February 8th. The closer we get to a potential shutdown, we could see volatility enter. We will also see investors buy Treasuries as that is what they did in the last government shutdown a few years back, a reversal of last week’s trend.

Another Super Thursday for Bank of England: The Bank of England is scheduled on Thursday (2/8) to publish its policy decision, Inflation Report, Official votes and new forecasts or as they call it, Super Thursday (cause their Super, thanks for asking). The Bank of England Governor will also give us his latest outlook as to how the negotiations are going with Brexit. Comments around the negotiations could potentially strengthen or weaken the British Sterling.

Manufacturing PMI: PMI readings from across the globe are also due out this week. Traders will watch these readings as potential weak readings could cause central banks to take further steps to stimulate their respective nation’s economies.

Earnings: Earnings are roughly halfway through and we have another 93 S&P 500 companies scheduled to report this week. Traders will continue to see individual stocks have huge price swings if a company’s earnings outpaces or fall short of what the street expected. According to Thomson Reuters I/B/E/S, we have now seen 50% of S&P 500 companies report 4th quarter earnings so far. Of them, 80% reported revenue above expectations while 78% have reported earnings above expectations. This week has some heavy hitters including Disney.

Expect More of the Same

Happy New Year! Investors will be trickling back from their vacations this week and will have a slew of data to go through along with factors to watch in the coming weeks. On the economic front, we have ISM Non-Manufacturing PMI, the Unemployment Rate, Non-Farm Payrolls and Average Hourly Earnings.

2017 Review: That will be a tough act to follow. The broader markets had a stellar year. We saw the Nasdaq composite go up 28%. The Dow had 71 record closes for 2017 with the S&P having 62. Now, a lot of the growth was driven by the large technology firms and global economic growth, but we also had a significant change in fiscal policy for the first time in over 30 years with the passing of tax reform which helped drove the markets higher. Investors will be watching to see if we have a repeat but that will likely be difficult.

Now what with the tax Reform: Investors will get a better sense as to what firms will be doing with the potential extra profits when they have their earnings calls later this year. As most investors expect companies to be repatriating billions in cash from overseas, we still don’t know what exactly they will do with the money. Investors will likely hear announcements around additional share buybacks, an increase to their dividend, pay down debt, M&A or (the least likely but the one most of us would like to see) wage increases. With the potential repatriation of cash, which is likely to happen in the 3rd or 4th quarter of 2018 so the cash is on the books for this year, we will likely see a steepening of the Treasury Yield curve.

National Hangover Day: Markets around the world will be closed on Monday (1/1) for National Hangover Day, ahem New Year’s Day. In Japan, markets do not reopen until Wednesday (1/3) giving traders an extra day to recover from their hangover. When markets do reopen during the shortened trading week, we could see some light volume to start off, providing an opportunity for low liquidity in some companies which creates the potential for outsized moves.

Non-Farm Payrolls & Unemployment Rate: Non-Farm Payrolls, the Unemployment Rate and Average Hourly Earnings for December are scheduled to be released this Friday (1/5). Should the figure show that the economy created more jobs than expected, or if average hourly earnings jumped higher, we will likely see the markets go higher, the US Dollar go higher and oil go lower. Should these numbers disappoint, the markets will likely go lower along with the US Dollar. As in previous months, the Unemployment Rate may drop but average hourly earnings will continue to stagnate as additional more robots get introduced into a company’s ecosystem in automating jobs.  

Oil: In the last week of 2018, oil hit a 2.5 year high trading above $60 after we saw a drop in US crude inventories and continued production cuts from OPEC. Investors will watch to see if demand continues to rise with global economic output increasing which will push the price of oil even higher.

FOMC Meeting Minutes: 8:01, 8:02, 8:03. The latest Fed meeting minutes are scheduled to be released on Wednesday (1/3). Investors will be looking closely at the language of the minutes to see what may have changed from the previous FOMC meeting which saw an interest rate hike. Investors will also be looking for additional details as to the timing of a potential increase in the amount of unloading of the Fed’s balance sheet.

Manufacturing PMI: PMI readings from across the globe are also due out this week. Traders will watch these readings as potential weak readings could cause central banks to take further steps to stimulate their respective nation’s economies.

Government shut down: We’re still a few weeks away from this but investors will be watching the latest on the potential government shutdown, again. The deadline for the government budget, which has already been kicked down the road 3 times while Congress worked on tax reform, is set for January 19th. But now as we get to the potential deadline, if we are still deadlocked, we could see volatility enter the picture as a potential government shutdown looms.

Can We Update Our Bank Holiday Rules

Another ridiculous law of a bygone era. A bank should be able to be closed for more than 72 hours so we have more 4 day weekends and no show up to work the day after Thanksgiving for a pointless half day.

 

Investors have a quiet week for the last trading week of the year. On the economic front, we have a quiet week with only Consumer Confidence and Chicago PMI.

Christmas:  Most markets around the world are closed on Monday for Christmas. Some of these markets are also closed Tuesday Boxing Day. (Except of course for the US since US banks can’t be closed more than 72 hours. This was put in during the Depression so people could get their money in case the bank was going under. Another rule which hasn’t kept up with the times). Somewhere in Europe last Friday, Homer Simpson was saying, “WooHoo, 4 day weekend!

Low Volume Week: With lots of investors on vacation for the week, and minimal economic news being released, we can expect to see low volume across the board. Unless we have some unexpected geo political event expect a small Santa Claus rally potentially pushing stocks higher. Additionally, individual stocks could potentially see outsized moves if they have a lack of liquidity.

Profit taking: With the Dow, S&P and Nasdaq having year to date returns of approx.25%, 20%, and 29% respectively, we will likely see some investors lock in profits for the year. If any stocks are down for the year (there is a handful) we could selling from them as investors try to offset their outsized gains for tax purposes. So any day this week, we could see individual stocks see outsized moves from a potential lack of liquidity.

Earnings: If any company does indeed schedule earnings or announce this week, they are most likely trying to hide a poor performance. So investors will be watching any company that has earnings as they try to hide a poor performance and have as few participants as possible trading. After the potential sell off from the low liquidity, this would be a great time to buy on the individual stocks price dip.  

Game of Thrones Saudi Style

Investors have a lot to digest this week from geo political to a potential change in fiscal policy. On the economic front, we have CPI, Retail Sales, PPI and Building Permits.

 

Tax Cuts and Jobs Act: Every single lobby group continues to be in lockdown, as the Senate and House versions of the tax bill have now been released. Any headlines out of the negotiations can potentially affect certain sectors. So if we hear an update on property taxes, we will likely see a reaction in home builders, which have been clobbered with the announced proposal.

13F Filings: By this Tuesday (11/14), all institutions with $100M in assets under management have to file their 9/30 ownership positions. Should some well-known investors declare new sizable positions in a certain company, we can expect that stock to have a bump higher. For example, when Berkshire Hathaway filed a position in the airlines last fall, the sector moved up over 3% the next day. If a known activist were to exit out of a stock, we could see that stock fall.    

Fed Members Speak: This week, we have 2 FOMC member scheduled to speak. Not much is expected from Patrick Harker or Charles Evans but any comments hawkish or dovish on the outlook with Jerome Powell leading the Fed could move markets.

Cash Grab in Saudi Arabia: So the Game of Thrones purge in Saudi Arabia to fight terrorism looks to just be a shakedown to plug up the Saudi’s dwindling foreign reserves as the kingdom looks to be confiscating cash and assets worth approx. $800 Billion. As other prominent Saudi’s feel they can be next, they are looking to liquidate their assets and move them overseas. This shakedown (terrorist fighting) is forcing billions to be pulled from the kingdom on the fears of instability crashing the Saudi stock market. The longer this goes on, the more likely the potential to ripple into other markets including Europe and the US. It does have an adverse effect on oil which continues to hit 2 year highs on the headlines and gold goes higher.

Earnings: Earnings has its last hurrah as we have 18 S&P 500 companies scheduled to report this week. According to Thomson Reuters I/B/E/S, we have now seen 457 of the S&P 500 companies report 3rd quarter earnings. Of them, 67% reported revenue above expectations while 72% have reported earnings above expectations.

CPI: Also on Wednesday (11/15), CPI is released. Should CPI come in stronger than expected, it would signal that the consumer is able to absorb the another interest rate hike. If it comes in weaker than expected, it may give the Fed reason to pause before potentially raising rates at the last meeting of the year.

Chinese Data: This week, China will be releasing a bunch of economic data points including Industrial Production and Fixed Asset Investment. Investors will monitor the data and the Yuan’s reaction as strong data will put upward pressure on the currency, with the potential for markets to rise globally.

And Now the Tough Part Begins

After an extremely heavy economic week, investors have a break as they concentrate on earnings and the ongoing negotiations for passing the Tax Cuts and Jobs Act. 

 

Tax Cuts and Jobs Act: Now with every single lobby group in DC in lockdown, headlines out of the negotiations can potentially affect certain sectors. So if we hear an update on property taxes, we will likely see a reaction in home builders, which were clobbered last week with the announced proposal. As the tax proposals continue to get negotiated, did anybody notice that taxes are going up for homeowners in all the urban cities, so basically every county that Hillary won in the last election?

Earnings: Earnings start to wind down, but first we have another heavy week ahead with 49 S&P 500 companies scheduled to report this week. According to Thomson Reuters I/B/E/S, we have now seen 81% of S&P 500 companies report 3rd quarter earnings so far. Of them, 67% reported revenue above expectations while 74% have reported earnings above expectations. This week has some big ones including Disney.

Fed Members Speak: This week, we have 1 FOMC member scheduled to speak. This will be the first comment by a Fed member since Jerome Powell was announced as the next Fed Chair come February. Not much is expected from William Dudley but any comments hawkish or dovish comments of the outlook with Powell leading could move markets.

Reserve Bank of New Zealand: On Wednesday, (11/8) New Zealand has their version of England’s “Super Thursday” by publishing their policy statement, Inflation statement, Official Cash Rate and Press Conference. With a new government recently forming, the bank is looking to appoint a new governor which will affect monetary policy. If they implement the new government policies of restricting immigration and foreign buyers of housing, we can expect the countries housing bubble to burst (since no more foreign buyers to dump their illegal money), so their monetary policy may have to be more accommodative.  

Veterans Day: Friday (11/10) in the US, Veterans Day is celebrated. US Banks and the bond market will be closed but the US equity markets will be open. Volumes will be lighter So make sure to thank a veteran on your off day for their service, oh wait, it’s not a Federal Holiday so companies make you work so you can’t do that.

Saudi Arabia: What is going on in Saudi Arabia? Over the weekend, we saw the arrest of Prince Alwaleed bin Talal, who happens to be a large stakeholder in Citigroup, Twitter and Apple. 8 High ranking Saudi officials were killed in a helicopter crash, and a ballistic missile was shot down by the Riyadh Airport. Saudi markets are down on the news and oil is now trading at a 2 year high. Any further instability to come out of the kingdom could result in higher oil prices and a drop in the broader markets.

 

 

And the Fed Chair Goes to….

Who will Trump give the rose (ahem) Chair Position to, and who will he say “Your Fired” to?

Investors have a busy week ahead as Trump is supposed to announce his pick for the next Fed chair, the latest Fed statement, and another busy earnings week. On the economic front, we have Manufacturing PMI, the Unemployment Rate, Non-Farm Payrolls and Average Hourly Earnings.

 

Head of the Fed: And the rose goes to… President Trump is likely to announce the new Federal Reserve chair before he leaves for China later this week. Sources are saying that the 2 finalists for the most powerful person on Earth are Fed Governor Jerome Powell and Stanford University Economist John Taylor, meaning Fed Chair Janet Yellen and the rest of the candidates are out of the running. PredictIt.com continues to have Jerome Powell as the odds on favorite. We will continue to see movements in the markets along with the US Dollar as the Fed Chair decision comes nearer. However, anything can happen.

Federal Reserve: So in the same week of a potential new Fed chair, we have the Fed scheduled to release a statement on Wednesday (11/1). This is one of the smaller meetings with no updated projections and no press conference after. The markets are factoring this meeting as being a nothing burger for rates. However, we may get a clue as to if the Fed started to unwind their balance sheet. If the unwinding started and is larger than anticipated, we may see the US Dollar shoot up, along with oil and Treasury Yields. Bank stocks will also be happy as banks continue to pocket the extra interest rate instead of paying depositors so you will continue to get .00001% on your savings. 

Earnings: Earnings are roughly halfway through and we have another 135 S&P 500 companies scheduled to report this week. Traders will continue to see individual stocks have huge price swings if a company’s earnings outpaces or fall short of what the street expected. According to Thomson Reuters I/B/E/S, we have now seen 55% of S&P 500 companies report 3rd quarter earnings so far. Of them, 67% reported revenue above expectations while 74% have reported earnings above expectations. This week has some heavy hitters including Apple and Facebook.

Non-Farm Payrolls & Unemployment Rate: Non-Farm Payrolls, the Unemployment Rate and Average Hourly Earnings for October are scheduled to be released this Friday (11/3). Should the figure show that the economy created more jobs than expected, or if average hourly earnings jumped higher, we will likely see the markets go higher, the US Dollar go higher and oil go lower. Should these numbers disappoint, the markets will likely go lower along with the US Dollar. Like in previous months, the Unemployment Rate may drop but average hourly earnings will continue to stagnate as additional part time workers at Amazon will only be paid minimum wage until a robot can do it for cheaper. As we learned last week, Amazon hired 160K people in the 3Q. So roughly half the jobs created in the US in the 3Q were by Amazon?

Bank of Japan: On Tuesday (10/31), the Bank of Japan will release a policy statement followed by a press conference. This will be the first statement since current Prime Minister Shinzo Abe won the latest election. With the election, Bank of Japan Governor Haruhiko Kuroda will likely be in charge of monetary policy for another 5 years after his current term is up next year. With him at the helm, investors do not expect a policy shift or for the Bank of Japan to announce any type of dial back of its huge stimulus program (Yay free money) any time soon.  

Another Super Thursday for Bank of England: The Bank of England is scheduled on Thursday (11/2) to publish its policy decision, Inflation Report, Official votes and new forecasts or as they call it, Super Thursday (cause their Super, thanks for asking). The Bank of England Governor will also give us his latest outlook as to how the negotiations are going with Brexit. Comments around the negotiations could potentially strengthen or weaken the British Sterling.

Catalonia: The latest out of Spain has the Catalan Parliament voting for independence to form the Catalan Republic, an independent and sovereign country. We don’t know the full extent of what the Spanish Government reaction will be at this time, but there are fears it will involve a police state similar to what Francisco Franco implemented in his reign. So far they have implemented Article 155 and the Spanish Prime Minister has fired the Catalan President, Police Chief and entire Catalan government (sounds very Democratic to me). Spanish bonds will likely spike higher on the news as the Euro will dip with European banks and markets to likely go lower as the crisis continues. Also, will history repeat itself? The last time the Catalan Republic was declared back in 1934, there was a state of war for 10 hours, resulting in 46 dead in Barcelona.

All Saints Day & Culture Day: On Wednesday (11/1) in certain European countries such as France and Italy, banks will be closed for All Saints Day. Since it’s in the middle of the week, markets will likely not see outsized moves the day before or after the holiday in their respective countries, and the rest of Europe. Also this week, Japanese banks are closed for Culture Day on Thursday (11/2).

Who will be the Most Powerful Person in the World

Hint: It’s not the President, and not in a Dr. Evil kind of way.

And we’re back, after a brief hiatus. Investors will be concentrating on 3Q earnings and the latest on the potential new Fed Chair, and the ECB has their interest rate statement. On the economic front, we have GDP First Release and PMI readings.

 

Earnings: Earnings intensity continues to increase as we have 172 S&P 500 companies scheduled to report this week. Traders will continue to see individual stocks have huge price swings if a company’s earnings outpaces or fall short of what the street expected. According to Thomson Reuters I/B/E/S, we have now seen 18% of S&P 500 companies report 3rd quarter earnings so far. Of them, 72% reported revenue above expectations while 71% have reported earnings above expectations.

Head of the Fed: President Trump has been interviewing 5 candidates to be the next Fed chair including the current Chair Janet Yellen, Gary Cohn, Jerome Powell, Kevin Warsh and John Taylor. Whoever does get picked will basically be the most powerful person on Earth with the power to create trillions of dollars out of thin air, literally. Way more powerful than the President, and incredibly an unelected official. PredictIt.com latest odds have Jerome Powell as the leading candidate to be the next Fed Chair. We could see movements in the markets along with the US Dollar as the Fed Chair decision comes nearer. However, anything can happen as Trump even mentioned putting John Taylor and Jerome Powell in charge together (however that would work).

ECB Interest Rate Statement: On Thursday (10/26), Super Mario Draghi will be speaking at the ECB’s press conference to announce their interest rate statement. These are scheduled 8 times per year. Investors are expecting the ECB to start unwinding its asset purchases and potentially hint at when they may start raising interest rates. Should they announce tapering their bond purchases (taking away the punch bowl) more than expected, we can expect to see markets globally fall and the Euro to strengthen. Should the ECB not announce any tapering, we could see markets rally higher.

GDP First Release: On Friday (10/27), we get our first release of US GDP for the 3rd quarter. We get 3 releases per quarter, Advance, Preliminary and Final. The first release is the most impactful. If the reading comes in above 3%, which is Trump’s target to get the economy moving, expect to see markets increase. There is always the wildcard of a lackluster reading from the multiple hurricanes we witnessed which could disappoint the street, sending markets lower.

Catalonia: The latest out of Spain had the Spanish Government invoking the “nuclear option” of Article 155 and suspending Catalonia Autonomy and powers of the local government. If they do indeed trigger this, we may see Catalonia leaders announce a declaration of independence.  If the parties continue to go down the rabbit hole as it seems, besides emboldening other break away regions, the Euro will dip and markets will also go lower.

China 5 Year Meeting: In Beijing, China had their 19th National Congress of the Communist Party start a few days ago. This 7-day meeting happens once every 5 years and gives the world some hints as to what the new administration may do in the next 5 years. Investors will be looking for hints as to potential economic reforms and structural reforms which has the potential to affect global markets. They could announce the GDP goal for the next few years. If they are to raise it above the 7% level (currently running around 6.5% - 6.9%), we could see an issuance of a lot new debt which will push global markets higher.

So Many PMI readings:  Flash Manufacturing PMI readings from across the globe are due out this week. Traders will watch these readings as potential weak readings could cause central banks to halt any potential tapering of current stimulates pushing markets higher. So bad news is good news for markets.

No Time to Back Down

Investors will watch to see the latest details out of President Trump’s proposed tax reform as we start the last quarter of the year. On the economic front, we have ISM Non-Manufacturing PMI, the Unemployment Rate, Non-Farm Payrolls and Average Hourly Earnings. 

Non-Farm Payrolls & Unemployment Rate: Non-Farm Payrolls, the Unemployment Rate and Average Hourly Earnings for September are scheduled to be released this Friday (10/6). This reading is likely to be affected by the Hurricanes Harvey, Irma and Maria. Should the figure show that the economy created more jobs than expected, or if average hourly earnings jumped higher, we will likely see the markets go higher, the US Dollar go higher and oil go lower. Should these numbers disappoint, the markets will likely go lower along with the US Dollar. Like in previous months, the Unemployment Rate may drop but average hourly earnings will continue to stagnate as additional part time workers at Amazon will only be paid minimum wage until a robot can do it for cheaper. As we learned last week, Amazon hired more people in the US than in 46 other states.

Oil: Brent oil hit a two year high of $58 per barrel last week. The move higher was thanks to the Kurdish referendum which has caused traders to worry about Turkey cutting off oil exports from Kurdish oil sales. This has still not happened and we haven’t actually seen a disruption, but the potential of one has driven oil higher. Investors will watch to see if these actual steps are taken, which would push oil higher. If not, we will likely see it fall from the recent spike.    

Tax Reform: Only 30 years in the making. Last week, President Trump unveiled his long awaited tax reform plan. Besides it obviously helping the rich which they continue to blatantly lie about (last time I checked 35 is lower than 39.6 and eliminating an estate tax only helps people with an “estate”), investors and analysts will continue to monitor who are the winners and losers as the negotiations on tax reductions continue. As details emerge, we could potentially see a spike in certain sectors, along with the US Dollar if money overseas finally gets repatriated. This is what I predicted back last October if Trump was to win. And my further prediction was for all this money to be used to be buy back stock, increase dividends, and mergers & acquisitions. Definitely not hire additional workers.    

Mid-Autumn Festival Day: From Sunday (9/30) to Thursday (10/4) Chinese banks will be closed for Mid-Autumn Festival Day. Expect businesses in China to come to a crawl over this period. Additionally, no economic data will be released during this time that could affect global markets.

Catalonia: This past Sunday (10/1), voters in Catalonia tried to get to the polls for a referendum on independence from Spain and were met by rubber bullets from the police injuring over 700 people. The local government had passed a law stating that if the referendum votes to declare independence from Spain, Catalan leaders could announce it within 48 hours of the vote. The uncertainty around the aftermath of the vote could take its toll on European markets. We have seen a spike in Catalonia bond yields and this has the possibility of sending the Euro lower on the potential instability. As of this writing, it is unknown what the results were of the referendum.

3rd Quarter Highlights: With the 3rd quarter ending this past weekend. I wanted to highlight some of the outsized gains.

Largest Gains 3Q: Brent Crude and WTI Crude, which were 20% and 12% higher respectively over the quarter. Brent was higher on geo political concerns from the Kurdish referendum and OPEC talk while WTI was higher on disruptions from the hurricanes. MSCI Emerging Markets Index, which was up 6.7% for the quarter and over 25% YTD on continuing recovery of economies around the globe from easy money policies.

Largest Gains YTD: Besides the MSCI EM index gains, the Nasdaq and the Dow are up 21% and 14% YTD on strong earnings and the potential for tax reform. The Euro is up approx. 13% against the US Dollar on improving economies in the Eurozone.

 

These updates will be taking a couple weeks off as the writer will be getting married.

 

Rocketman vs Mentally Deranged Dotard

Investors will continue to pay attention to the saber rattling between the Rocketman (Kim Jong Un) and the Mentally Deranged Dotard (President Trump). On the economic front, we have Consumer Confidence, Durable Goods.

Ze German Elections: On Sunday (9/24), Germans went to the pols to elect members to the German Federal Parliament. From this they will form a government. Even though Angela Merkel and her Christian Democratic Union party along with the Christian Social Union are expected to be the largest party winners in the election, they will likely fall short of the majority. Investors will be watching to see who they will have to form a coalition with. If it’s with the Center left Social Democratic Party (and the favorites right now to form a coalition with Merkel), expect the status quo. If a far left coalition was to form, (which the polls re not suggesting), we could see the German market go lower along with the Euro. The military industrial complex stocks could slightly fall as one of those parties platforms is to dissolve NATO and all German missions abroad.   

GDP Final Release: On Thursday (9/28), we get our third and final release of US GDP for the 2nd quarter. We get 3 releases, Advance, Preliminary and Final. The first release is the most impactful. However, if a line item were to surprise in the Final reading, the markets can react accordingly. The 2nd release had the US economy growing at 3%, the highest in 2 years. If this reading were to be even higher, we can expect to see equities go higher. If the report comes in substantially weaker, expect equities to fall.   

Rocketman vs Mentally Deranged Dotard: Kim Jong Un’s latest message was that he would launch a H Bomb over the Pacific Ocean. If he was to go through with this, even with no casualties, markets could potentially crash. We would see a movement into safe havens such as gold, US Treasuries and the Japanese Yen (algos will also be confused as the Yen should weaken if the rocket goes over Japan). Even though doing that would likely be a suicide mission for the North Korean regime, it is unknown how the world would actually react and what kind of sanctions would be put in place. It would kill a lot of fish though, and you probably wouldn’t want to eat sushi from that part of the world.   

Consumer Confidence: On Tuesday (9/26) Consumer Confidence is released. Investors will be looking to see how much of an effect the hurricanes have had on this reading as it will be captured in the report. A scale back in this reading could see stocks slide.

Reserve Bank of New Zealand: On Wednesday, (9/27) New Zealand has their version of England’s “Super Thursday” by publishing their policy statement, Inflation statement, Official Cash Rate and Press Conference. For the country of 4M Kiwis, New Zealand will give us their latest ratio of sheep to people and consumer consumption of Tui beers. Additionally, the higher the ratio of sheep to people, then fewer farmers is converting their farms to cows to sell milk to China, signaling a slowdown in China.

Please Move the UN General Assembly Out of NY

Nothing like giving terror sponsors, and some may be good sponsors, a platform to speak from.

 

New York will be turned into a parking lot for the United Nations General Assembly as investors concentrate on this week’s Fed statement. On the economic front, we have Building Permits and the Philly Fed. The North east will also keep an eye out to the Atlantic as Hurricane Jose threatens the eastern seaboard. 

Federal Reserve: On Wednesday (9/20), the Fed will release a statement where everybody will be waiting to see if the Federal Reserve decides to raise interest rates again. Right now, the odds are very low for the Fed to raise rates as we have already seen 2 interest rate raises this year. If the Fed does raise rates for the third time in 2017, we can expect to see significant volatility following the statement release. Some of the results of an interest rate increase include a strengthening in the US Dollar, a spike in Utilities & Financial companies, a weakening of foreign currencies, oil and metals. We would also see mortgage rates go up as Treasury yields will increase. This statement will be followed by a press conference with FOMC Chair Janet Yellen taking questions. However, the statement may potentially announce detail timing and amounts of how much the Fed will start unwinding their balance sheet. If they do not raise rates at this meeting, they will have two more times this year to raise rates.

Bank of Japan: On Thursday (9/21), the Bank of Japan will release a policy statement. Investors are not expecting any massive monetary policy shift but we may potentially see a shift its bond yield target. Any unexpected monetary tightening by the bank would strengthen the Japanese Yen and send markets lower.

The UN General Assembly: New Yorkers most hated time of the year when every single world leader descends on Manhattan to cause gridlock throughout Manhattan and spew empty rhetoric. We usually do not see headlines out of the event, but with Trump and every world leader making speeches, we could see a geo political move that could affect foreign exchange and the markets as whole. If not, it’ll just be another week of New Yorkers cursing about all the delays and closures. Finally, the MTA has a legitimate excuse about being terrible.  

Rosh Hashanah: On Thursday (9/21), markets in the US will see subdued volume for the Jewish holiday. Because of the lighter than normal volumes, we can potentially see outsized moves in individual stocks if they have a lack of liquidity.

Insurers and Reinsurers: Following the latest hurricanes, insurers and reinsurers will continue to assess the damage as additional storms are forecasted to hit the Caribbean. The worse these storms turn out to be and the higher the damage assessments, the harder those stocks may be hit.  

New Zealand Elections: Voters down under in the country of 4.6M will be voting to elect New Zealand’s 52nd Parliament. From my understanding, the National Party is in the lead with Labour in 2nd. Should Labour win, expect taxes to go up, which could send their market lower. If the National party wins, expect the staus quo. In either outcome, we will likely see a spike in Tui and Speight sales. 

Respect-for-the-Aged Day: Japan’s banks will be closed on Sunday (9/17) for, wait for it, Respect-for-the-Aged Day. A holiday to celebrate old people. Not sure how much the people this holiday is intended for can actually celebrate it.

Another Hurricane? Buy the Dip

Investors will look at the damage from Hurricane Irma as insurance companies (and hedge funds) start to close their eyes and we start the cleanup process. On the economic calendar, we have CPI, Retail Sales and PPI.

Hurricane Aftermath: After destroying islands in the Caribbean last week, Hurricane Irma made landfall this weekend along the west coast of Florida. The 2nd major hurricane in 2 weeks to make landfall in the US. In the aftermath, insurance companies will continue to determine how much this will affect their bottom line and reinsurance company’s bottom lines. Similar to Texas, a substantial amount of homeowners do not have flood insurance. We will also pay attention to airlines and leisure companies as the airports may be damaged and hotels may not be able to reopen so quickly. We should also watch the US Dollar as the larger the amount the Federal government kicks in with emergency aid, we will see a weakening of the dollar. Also watch Treasury’s as the 10 Year Treasury note yield is hovering just above the 2% level while gold continues to rise. The more destructive the damage is, we will likely see a larger dip in 3Q GDP. Even though gas has risen since Hurricane Harvey, oil production will likely not be affected as most of the oil rigs are away from the direction of Irma. We should also pay attention to (besides homebuilders) are car stocks as the more flooding we see, similar to Texas, the more cars that will have to be replaced. Your orange juice may also spike, so switch to milk. It does a body good. Beer also, while you’re at it.     

Bank of England and Swiss National Bank: The Bank of England is scheduled on Thursday (9/14) to publish its policy decision, Inflation Report, Official votes and new forecasts or as they call it, Super Thursday (cause their Super, thanks for asking). The Bank of England Governor will also give us his latest outlook as to how the negotiations are going and their thoughts around the ECB’s potential reduction in their Asset Purchase Program. Comments around the program could potentially strengthen or weaken the British Sterling. The Swiss National Bank will also be releasing the latest Libor rate and Monetary Policy Assessment. Data around their portfolio will not be released at this time so you will have to wait a little longer to see that the only institution buying US stocks are the Swiss National Bank.

CPI: Also on Thursday (9/14), CPI is released. The recent hurricanes likely occurred too late to be captured in this data. So don’t worry, the price gouging we’ve heard about will show higher CPI figures next month, before falling in the following months as inflation will continue to be lower than what the Fed would like to see.    

Chinese Data: This week, China will be releasing Industrial Production and Fixed Asset Investment. Investors will monitor the data and the Yuan’s reaction as strong data will put upward pressure on the currency, with the potential for markets to rise globally.

Fed Blackout: This week, there are no public speeches by Fed officials as they are in a communications black out period until the next Fed interest rate statement, which is scheduled for next week.

Possible War? Buy the Dip!!!

As Labor Day weekend in the US is the official end of summer, we should start to see volumes pick up again in the stock markets over the next few months. On the economic front, we have a quiet week with ISM Non - Manufacturing PMI. Investors will also look to see if we have another hurricane brewing in the Atlantic and what path of destruction it may take it as insurance companies start to close their eyes. North Korea may also come into the forefront.

Holiday, celebrate: Markets will be closed in the US and Canada on Monday (9/4) for Labor Day. When trading does resume, expect volumes to be lower as traders and quants are still recovering from their BBQ hangovers. Individual stocks could potentially see outsized moves if they have a lack of liquidity.

North Korea: Over the weekend, North Korea supposedly detonated a hydrogen bomb and spoke of an EMP. In reaction, futures went lower with safe havens such as Gold, Treasury’s and the Japanese Yen go higher. But since it continues to be a war of words, once the initial reaction sends markets lower, people keep buying the dip and we see stocks go higher. As we continue to see rhetoric out of North Korea and Trump, markets will likely go lower on headlines, and then recover.

Hurricane Aftermath: 50 inches of rain takes a long time to recede and Texas has a lot to do as it continues to recover and assess the damage from Hurricane Harvey. In the aftermath, insurance companies will continue to determine how much this will affect their bottom line. But as we are learning, a lot are in the clear as a substantial amount of homeowners do not have flood insurance. In reaction, liquor companies will likely scale back as some people will not be able to spend the insurance money on booze, drugs and maybe, a vacation. We should also pay attention to manufactures and see how long the supply chain is disrupted with a potential to halt production sending that sector trend lower.

Got gas? We aren’t likely to see the gas shortages of the 70’s, but in some areas of Texas, there is no gas to go around. This shortage will obviously affect energy companies stocks as they have no product to sell. But energy companies will potentially go higher using the storm as a reason to shoot up gas prices over night, and then take a significantly longer time to drop prices back to pre-storm levels. We are also waiting to see how long until some rigs are back online and when they will be able to ship oil since roads are still flooded. 

ECB Interest Rate Statement: On Thursday (9/7), Super Mario Draghi will be speaking at the ECB for their interest rate statement. These are scheduled 8 times per year. Investors will be looking for any hints as to the unwinding of the ECB’s asset purchases. Any scaling back announcement would see a spike in the Euro, which would negatively affect exports from Europe, sending European stocks lower.

US Default: With the debt ceiling about to expire in a few weeks, we are seeing a jump in US Treasury bills that mature before the end of September, and a dumping of US Treasury bills that mature in October. From this activity, we are seeing a spike in the short term yield curve. Investors will watch for statements from Republicans as to how the negotiations are going as the government could also shut down at the end of the month without a new budget. It is still highly unlikely that the US would default on its own obligations. However, investors will keep a watch on Treasury bills as a leveling of the yield curve would signal that they are more likely to come to an agreement on the debt ceiling.