18 Nov IS LIQUIDITY THE GREATEST CONCERN OF THE FED?S TODAY ONE OF THE STARKEST EXAMPLES OF TOMORROW’S VIEW OF REALITY?
Equities were encouraged by headlines suggesting the US and China are “coming down to the final stages” of a trade deal. Trade sensitive tech shares again led the advance. Treasuries traded nominally lower. Oil ended about 2% higher.
Data released Friday was mixed with the manufacturing data skewed by the GM strike. Retail sales largely met expectations. Generally speaking the statistics indicated the consumer is still willing to spend albeit at a slower pace than earlier in the year.
Washington is still viewed as nothing other than a freak show. Most have acknowledged the vast majority of leading Democratic presidential candidates would wreak havoc on the economy and the market.
Some have opined the Democratic Party has set itself up for massive failure as most believe the country is not as far left as the candidates are suggesting. Several high profile business leaders are stating many reliable Democratic donors/backers will be uninvolved given the progressive and antibusiness stance of these leading candidates.
Speaking of politics, for the first time ever all fifty states are investigating a company…Google. Wow! Each state’s motives are different but the simple fact of the matter is Google is in the cross hairs of everyone. The possible ramifications are infinite.
Radically changing topics, the Fed warned yesterday of “deterioration in US Treasury and equity futures markets.” The Fed further stated “liquidity in equity futures has become very fragile over time, disappearing when it is needed the most.”
I will argue this is the result of Dodd Frank and the massive proliferation of index and passive investing where the end user and provider of liquidity is the customer not a money center bank or brokerage firm. Fear is more powerful than greed.
In my view, the Fed validated the concerns of more seasoned market participants. Hopefully change will occur before a crisis unfolds.
What will happen this week?
The economic calendar is comprised of various housing statistics, manufacturing surveys and the Minutes from the latest FOMC meeting.
Last night the foreign markets were mixed. London was up 0.31%, Paris down 0.14%, and Frankfurt down 0.07%. China was up 0.62%, Japan up 0.49% and Hang Sang up 1.35%.
The Dow should open flat The 10-year is off 6/32 to yield 1.86%.