Stocks were pretty well hammered this week, as shown in the figures below.
What did them in was not that the FOMC eased for the first time since 2008, but that it was only 25 basis points. Everybody, including President Trump, was looking for a 50 basis point cut, and they didn't get it, so market participants, already concerned at the ongoing tariff war with China, sold the news (after buying the rumor).
The drop was hardly anything to get excited over as all markets were down less than four percent. The coming week may outdo this last one however, as China has upped the ante Monday by devaluing the yuan (further proof that the Chinese are currency manipulators, along with everything else we don't like about them) and halting US agricultural imports.
These developments are very bad for a jittery market and this one has a case of the DTs. Watch for either a cascading, waterfall type event or some intervention by our friends at the NY Fed, those hale and hearty fellows that saved the Dow with a 200-point boost in the final half hour of trading on Friday. They're likely to be quite busy buying stocks again this week.
Keep a close eye on the divergence between big caps and small-to-mid caps. The smaller stocks are in danger of entering correction or even bear markets for some. They're not supported by the funds nor the fed, so they may be the first dominoes to fall in a crisis, which is entirely possible at this juncture.
Since the federal government has already put in place a moratorium on the debt ceiling, don't expect a September swoon, as we've seen so often when the government can't agree on a budget. With the agreement signed last week, the Trump administration and the congress has committed to spending well beyond whatever is allocated or budgeted. A trillion dollar deficit has now become the norm, though tariff income may begin to whittle away at that (there is some silver lining to the tariffs).
Generally, markets are looking quite unstable and another 3-4% decline could be in the cards. There are few catalysts for upside development. Gold and silver are not going anywhere, despite the howls coming from the Goldbugs and Silver Surfers. The rally has topped out. There may be a little movement to the upside, but it won't be allowed to develop into anything outstanding. When gold goes past $1500 and silver sells for more than $18 an ounce, that may be the time to change one's outlook.
WTI crude is going to end up in the $40s per barrel price by October, if not sooner. There's a massive glut and the economy is by no means overheating. Besides, nobody in the oil business wants to correctly identify the impact of solar, wind, increased efficiency in auto engines, or conservation by US drivers (who are getting older by the day and thus drive less and less).
The world is not going to come to an end this week, but we may be treated to a preview of what it will look like. 2023 is the outlier.
BTW: The 10-year treasury note is likely to sink below 1.50% THIS YEAR. Good for bond sellers and debtors. There is no inflation than cannot be sidestepped with alternatives or smart shopping.
At the Close, Friday, August 2, 2019:
Dow Jones Industrial Average: 26,485.01, -98.41 (-0.37%)
NASDAQ: 8,004.07, -107.05 (-1.32%)
S&P 500: 2,932.05, -21.51 (-0.73%)
NYSE COMPOSITE: 12,839.51, -81.31 (-0.63%)
For the Week:
Dow: -707.44 (-2.60%)
Dow Transports: -402.24 (-3.73%)
NASDAQ: -326.14 (-3.92%)
S&P 500: -93.81 (-3.10%)
NYSE COMPOSITE: -396.00 (-2.99%)
What did them in was not that the FOMC eased for the first time since 2008, but that it was only 25 basis points. Everybody, including President Trump, was looking for a 50 basis point cut, and they didn't get it, so market participants, already concerned at the ongoing tariff war with China, sold the news (after buying the rumor).
The drop was hardly anything to get excited over as all markets were down less than four percent. The coming week may outdo this last one however, as China has upped the ante Monday by devaluing the yuan (further proof that the Chinese are currency manipulators, along with everything else we don't like about them) and halting US agricultural imports.
These developments are very bad for a jittery market and this one has a case of the DTs. Watch for either a cascading, waterfall type event or some intervention by our friends at the NY Fed, those hale and hearty fellows that saved the Dow with a 200-point boost in the final half hour of trading on Friday. They're likely to be quite busy buying stocks again this week.
Keep a close eye on the divergence between big caps and small-to-mid caps. The smaller stocks are in danger of entering correction or even bear markets for some. They're not supported by the funds nor the fed, so they may be the first dominoes to fall in a crisis, which is entirely possible at this juncture.
Since the federal government has already put in place a moratorium on the debt ceiling, don't expect a September swoon, as we've seen so often when the government can't agree on a budget. With the agreement signed last week, the Trump administration and the congress has committed to spending well beyond whatever is allocated or budgeted. A trillion dollar deficit has now become the norm, though tariff income may begin to whittle away at that (there is some silver lining to the tariffs).
Generally, markets are looking quite unstable and another 3-4% decline could be in the cards. There are few catalysts for upside development. Gold and silver are not going anywhere, despite the howls coming from the Goldbugs and Silver Surfers. The rally has topped out. There may be a little movement to the upside, but it won't be allowed to develop into anything outstanding. When gold goes past $1500 and silver sells for more than $18 an ounce, that may be the time to change one's outlook.
WTI crude is going to end up in the $40s per barrel price by October, if not sooner. There's a massive glut and the economy is by no means overheating. Besides, nobody in the oil business wants to correctly identify the impact of solar, wind, increased efficiency in auto engines, or conservation by US drivers (who are getting older by the day and thus drive less and less).
The world is not going to come to an end this week, but we may be treated to a preview of what it will look like. 2023 is the outlier.
BTW: The 10-year treasury note is likely to sink below 1.50% THIS YEAR. Good for bond sellers and debtors. There is no inflation than cannot be sidestepped with alternatives or smart shopping.
At the Close, Friday, August 2, 2019:
Dow Jones Industrial Average: 26,485.01, -98.41 (-0.37%)
NASDAQ: 8,004.07, -107.05 (-1.32%)
S&P 500: 2,932.05, -21.51 (-0.73%)
NYSE COMPOSITE: 12,839.51, -81.31 (-0.63%)
For the Week:
Dow: -707.44 (-2.60%)
Dow Transports: -402.24 (-3.73%)
NASDAQ: -326.14 (-3.92%)
S&P 500: -93.81 (-3.10%)
NYSE COMPOSITE: -396.00 (-2.99%)
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