Equities advanced on trade.  There was also positive news surrounding Brexit.

Treasuries declined about 1 ½ points, perhaps the result of consumer confidence unexpectedly rising to the highest level in three months.  Analysts had expected a decline.  The gauge of current conditions climbed to the highest level this year while the expectations index also rose, rising for the second consecutive month, the first such occurrence since March.

The sentiment survey indicated a widening gap of expectations based upon political party.  Republicans are growing more confident while Democrats declining to the lowest level since October 2008.

As widely discussed the Treasury market has fully discounted a major slowdown if not an outright recession.

Many times I have opined growth has and will continue on the upside.   I believe sentiment indicators are the ultimate feedback indicator.  It only tells us where we have been not where we are going.

But with the above written, the sentiment in the media is dour.  I don’t think it is wrong to write the country is the most politically divisive since at least Viet Nam and Watergate.  The Establishment loathes the President.  The recessionary narrative is around epic proportions, partially the result of trade.

It is against his backdrop is why I am not discounting this sentiment survey placing some confidence in its predictive qualities.

Changing topics, oil rose about 2% as an Iranian oil tanker was struck by two missiles.  Reasonability has not yet been claimed.  It is widely accepted there in no geopolitical premium in prices.  Will this radically change?

And then there is the supply equation.  The common perception is supplies are ample.  This however is in direct contradiction to OPEC’s recent pronouncement that the third quarter had the sharpest supply deficit since the first quarter of 2007 as well as industry reports stating US production will decline in 2019 versus 2018.

Wow!  Talk about a disconnect!!  Rarely is there such an “either/or” dichotomy.  What is correct?  The narrative and stock prices or the data?

What will happen this week?  Trading is expected to be quiet today given the bond market is closed for Columbus Day.  The economic data is comprised of retail sales, housing data and several manufacturing statistics.

Last night the foreign markets were mixed. London was down 0.56%, Paris down 0.77% and Frankfurt down 0.60%.  China was up 1.15%, Japan closed for a holiday and Hang Sang up 0.81%.

The Dow should open moderately lower as China stated it wanted to “iron out details” before signing it. The 10-year is closed for Columbus Day.


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