DATA WAS AGAIN STRONGER THAN EXPECTED

Will monetary policy assumptions soon change?  Yesterday’s data continued to surprise on the upside.  Retail sales, initial jobless claims, the Philadelphia Fed all painted a picture of strength.  Import prices ex oil also posted gains stronger than anticipated.  Equities advanced but Treasuries declined on the data.

Radically changing topics, as widely known approximately 55% of S & P 500 earnings come from foreign sales.  CNBC commented yesterday that 40% of the world’s 195 countries may experience civil unrest in 2020, up from 25% in 2019.  Countries they deemed most at risk is China, Russia, Saudi Arabia, Iraq, Iran, Hong Kong and Chile.

If this unrest occurs, how will it affect macroeconomic and geopolitical assumptions?  Perhaps the biggest question will the market ignore such unrest as only noise?

As discussed many times approximately 55% of all equity assets are in passive or momentum driven strategies, thus suggesting any type of analysis is essentially meaningless.  Will there be a rude awakening?

Domestically in elections past rising taxes and soft on crime was the elixir to losing an election.  Today these are major planks of the Democratic party.

Will attitudes abruptly change?  Will all become arm chair foreign policy experts?  Will the prevailing Democratic platform ensure a Republican victory in November based upon some event that causes a boomerang response in attitudes?

I do not know but history is littered with examples of such occurring.  The pivotal question is when and what would be the catalyst.

I believe such will impact the markets and monetary policy assumptions shattering the illusions of complacency where everything is about the cost of execution not about the why of executions.

What will happen today?

Last night the foreign markets were up.  London was up 1.02%,  Paris up 0.86% and Frankfurt up 0.58%.  China was up 0.05%,  Japan up 0.45% and Hang Sang up 0.60%.

The Dow should open nominally higher following data that the Chinese manufacturing sector is expanding.   The 10-year is unchanged at 1.82%.

 

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