02 Dec A BUSY WEEK FOR STATISTICS
2019 will perhaps be regarded as the year the unexpected occurred. Domestically the economic forecast for 2019 penned around this time last year was largely met but the response to it was largely unexpected given the consensus view changed to one of a forecasted contraction because of the trade war.
The overnight rate was reduced by 33% versus increasing 22%. The 10-year Treasury fell in yield by 46% versus rising 23%. Mega capitalized technology companies advanced over 43%, an advance that greatly skewed the market averages.
Wow! Talk about discounting an event that had not occurred!
The question at hand is whether this discounting will unwind itself to today’s reality?
Speaking of a potential change in reality, oil shares have been decimated. Apple is worth more than the S & P 500 oil index, an environment thought as incomprehensible as little as two years ago.
Last month Exxon warned of a pending tightness in supplies if not outright shortages given the lack of upstream infrastructure and the potential decline in American production. Several government entities are still for casting between 750,000-1,000,000 barrel increase in 2020, an increase that oil industry executives think as nothing other than ludicrous given the lack of funds forcing a massive curtailment in capital expenditures.
Exxon states about 7% of oil reserves are used each year. Reserves are only increasing at a 5.5%. Will there be a sudden reversal in psychology?
Late last week, the Federal Reserve released the Beige Book or the statistical reference utilized at the upcoming FOMC meeting. The Beige Book stated “the US economy expanded modestly through mid-November amid steady consumer spending and some brighter signs from manufacturers.” It further stated the “economic picture remained quite positive for the exception of the energy sector which deteriorated modestly.”
Will this week’s economic calendar be interpreted in a similar manner? It is crowded with top tier statistics such as the ISM, the ISM Non-Manufacturing Index, several employment reports including the BLS report and confidence surveys.
Last night the foreign markets were mixed. London was up 0.02%, Paris down 0.26%,and Frankfurt down 0.04%. China was up 0.13% Japan up 1.01% and Hang Sang up 0.37%.
The Dow should open nominally higher with all attention on trade. The 10-year is off 16/32 to yield 1.84%.