01 Apr CAN THIS BE A SIGNIFICANT WEEK?
It appears the economic landscape is chaotic. The dramatic shift of the Federal Reserve, trade, the use of algorithms, all drive the uncertainty in the markets and geopolitics. There are huge changes in narratives that greatly impact market direction.
March’s unemployment data will be released Friday. The statistics could either confirm or deny the prevailing recessionary narrative, a narrative that has produced an explosive rally in Treasury prices. Perhaps the only certainty to write is that if the data projects an environment of strength, Treasury prices will fall.
Speaking of change, oil capped its best quarter since 2009, an incredible feat given the domineering recessionary narrative. The consensus view is that these gains will be short lived for a myriad of reasons, a view that I do not share.
Will market psychology radically change believing a potential supply shortage could occur given geopolitical and country specific macroeconomic issues? This is the intermediate view of Exxon.
If so how will such impact inflationary expectations, expectations that are virtually nonexistent?
Will first quarter’s tail winds become second quarter head winds? The tail winds are movement in trade negotiations and dovish monetary policy. If trade is resolved, will growth fears begin to recede and monetary policy will again become front of center?
What about earnings? Will such be a catalyst or detractor? To date warnings are about three times greater than in previous quarters.’ I am certain the earnings narrative will continue to rise throughout the week.
This indeed can be a significant week.
Last night the foreign markets were up. London was up 0.61%, Paris up 0.70% and Frankfurt up 1.12%. China was up 2.58%, Japan up 1.43% and Hang Sang up 1.75%.
The Dow should open moderately higher on trade optimism and stronger than expected Chinese economic data. The 10-year is off 10/32 to yield 2.45%.