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Don't worry - RECESSION still 6 to 8 months away


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#1 dTraderB

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Posted 22 March 2019 - 03:44 PM

...according to this:

 

Liz Ann SondersVerified account @LizAnnSonders
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Liz Ann Sonders Retweeted Daniel Grioli

Inversion Recession Start

June 1973 November 1973

November 1978 January 1980

October 1980 July 1981

June 1989 July 1990

July 2000 March 2001

August 2006 December 2007

Liz Ann Sonders added,

Daniel Grioli @market_fox
Replying to @LizAnnSonders
Exactly, around 6-18 months if memory serves. 1f98a.png
1:05 PM - 22 Mar 2019  


#2 dTraderB

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Posted 22 March 2019 - 03:58 PM

Ellen NakashimaVerified account @nakashimae
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BREAKING: The House Judiciary Committee is told to expect notification by 5pm that the Mueller report has been delivered to Barr

1:50 PM - 22 Mar 2019


#3 Dex

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Posted 22 March 2019 - 04:15 PM

 

...according to this:

 

Liz Ann SondersVerified account @LizAnnSonders
FollowFollow @LizAnnSonders
More

Liz Ann Sonders Retweeted Daniel Grioli

Inversion Recession Start

June 1973 November 1973

November 1978 January 1980

October 1980 July 1981

June 1989 July 1990

July 2000 March 2001

August 2006 December 2007

Liz Ann Sonders added,

Daniel Grioli @market_fox
Replying to @LizAnnSonders
Exactly, around 6-18 months if memory serves. 1f98a.png
1:05 PM - 22 Mar 2019  

 

 

Start in November?  

 

End time is the key for the 2020 election.   If it last most of the year Trump will lose.  Economics is the key for incumbent presidents.  If good economics, Trump wins, if poor he loses. 

 

He loses, the market goes down. 


"The secret of life is honesty and fair dealing. If you can fake that, you've got it made. "
17_16


#4 dTraderB

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Posted 23 March 2019 - 06:21 AM

CARL:

 

DP WEEKLY WRAP: Fakeout Breakout; Bond Blastoff
Carl Swenlin |  March 22, 2019 at 07:00 PM

 

Last week certain indicators had me looking for a short-term market top, and on Wednesday it looked as if it had arrived. But no. On Thursday the market moved to new rally highs on volume that wasn't too little or too much, so I thought that looked like a pretty solid breakout. But no -- it was a fakeout. Friday saw a level of selling that we haven't seen for some time, and price retested support that goes back to the three important price tops that were formed late last year. So we finally got the short-term top I was looking for, and in our market discussion below we will look for clues as to what might happen next.

15532889980181581317153.png

The DecisionPoint Weekly Wrap presents an end-of-week assessment of the trend and condition of the stock market (S&P 500), the U.S. Dollar, Gold, Crude Oil, and Bonds.

Watch the latest episode of DecisionPoint on StockCharts TV's YouTube channel here!

https://stockcharts....d-blastoff.html



#5 dTraderB

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Posted 23 March 2019 - 06:25 AM

YEAH, Right.

 

S&P 500 could fall 40% as yield curve inverts, says analyst of one of 2018’s best hedge-fund returns

 

Stock investors should heed the warning emanating from the bond market, says at least one hedge-fund manager, as the yield curve staged a stunning inversion Friday.

“I think people are going to be surprised where the S&P 500 is trading at the end of the year. We’re going at least for a 40% decline from the S&P’s top,” Otavio Costa, a macro analyst at Crescat Capital, a hedge fund that oversees $52 million, told MarketWatch in an interview.

The analyst of the investment firm, says the inversion of the yield curve, where short-dated yields rise above their longer-dated peers, signals an ignominious end to a 10-year bull run for the S&P 500 index, which bottomed in March of 2009 but has mounted a record-long rally, by some measures, since that point.

In particular, Costa said the growing number of inversions in yield spreads across Treasury maturities suggested a bear-market for equities was at hand, in the face of a darkening global growth picture.

Costa’s comments come as the 10-year Treasury note yieldTMUBMUSD10Y, +0.00% tumbled 10 basis points to 2.439%, while the 3-month T-bill TMUBMUSD03M, +0.00%  was down a single basis point to 2.462%, leaving the spread between the two maturities at around negative 3 basis points.

An inversion of this spread — the most closely watched by economists — has preceded every recession since 1960, though the timing between the two events can vary, according to the New York Fed. Bond prices move inversely to yields.

 

The inversion is the first such since 2007, just before the financial crisis that unfolded, reaching a crescendo in the fall of 2008. Yield curves invert because investors worry about future economic growth, which can stoke demand for safe, long-term Treasurys, while pushing down long-term rates. Up until January, the Federal Reserve had been lifting interest rates, nine times since December of 2015, which can have the effect of pushing down shorter-term rates, which are the most sensitive to central-bank rate increases, higher.

Read: The yield curve inverted — here are 5 things investors need to know

The T-bill and 10-year’s inversion has rippled through equity markets, with the S&P 500 SPX, -1.90% and the Dow Jones Industrial Average DJIA, -1.77% on track to finish lower by more than 1% on Friday. Both equity benchmarks were down more than 2% from their recent peak on Thursday, FactSet data show.

Costa, a 29-year -old Brazilian native, who has been featured on Bloomberg News, says he is bearish on U.S. stocks and bullish on gold, or what he dubbed the “macro trade of the century,” with the expectation that investors would rush into havens as panic sets in and investors discard assets perceived as risky, like stocks, in favor of those viewed as havens, like gold.

SeeHere’s when the yield curve actually becomes a stock-market danger signal

ReadBrace for a 15% plunge in S&P 500 next year if the Treasury yield curve fully inverts

“I believe the second leg of the bear market is what’s happening today,” said Costa, who argued Friday’s slump in stocks may be a continuation of the December selloff.

Also check outBear market for stocks already under way, recession coming, says Crescat Capital

Costa says investors shouldn’t focus on any one inversion, but rather Crescat looks at the total percentage of inversions across U.S. yield spreads, based off maturities as extended as the 30-year bond TMUBMUSD30Y, +0.00%  to something as short as the overnight fed-funds rate. In the chart below, this percentage of curve inversions jumped to 60% this week from around zero in early 2018.

By measuring the number of inversions across instead of a single spread, the broader gauge would be less affected by individual idiosyncrasies that could muddy the economic signal of the bond-market recession indicator.

MW-HG209_invers_20190322122202_NS.png?uu

Costa concedes the Fed’s swift actions on March meeting could deflect concerns around excessive monetary tightening, in theory, buying the U.S. expansion more time.

On Wednesday, the central bank’s outlook for future rate increases projected zero increases for 2019 from two rate increases, as the Fed reacts to tightening financial conditions that cropped up late 2018 and economic weakness setting in outside of the U.S.

Denver-based Crescat, run by Stanford University alum Kevin Smith, posted a gain of 40.5%, ranking it as the best-performing macro hedge fund in 2018, according to data firm BarclayHedge. This strong run, however, came on the back of a 23% loss in 2017, a banner year for international stock markets.

The contrarian investment firm has been making a number of bets that weakness in China will ripple throughout the rest of the world.

https://www.marketwa...urns-2019-03-22



#6 dTraderB

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Posted 23 March 2019 - 06:32 AM

Will start buying XLF next week if levels go below at least 4% from Friday's close; also selected Financials.

I sold during early March so I need to use some cash to add a few LT Portfolio holdings 

I will be happy if I can get an additional 3 to 4 % during the next Quarter (April - June)

 

Why stock market investors should worry about a bearish divergence in financials 

XLF falls to 2 1/2-year low relative to the S&P 500 as yield curve inverts, a reminder of events leading up to the financial crisis

There’s something brewing in the financial sector that could be worrisome to stock-market investors, especially those who shiver recalling events that led to the 2008-09 financial crisis.

And don’t forget about the great recession predictor, known as an inverted yield curve, that has also flashed a warning signal.

The SPDR Financial Select Sector exchange-traded fund XLF, -2.76%  tumbled 2.8% Friday, with 64 of its 68 equity components losing ground. The financial ETF (XLF) has lost 4.9% this week, amid a multisession losing streak, as the Federal Reserve’s downbeat assessment of the economic outlook sent longer-term Treasury yields to 15-month lows. See Bond Report.

Don’t missFed jettisons 2019 rate-hike plans as economy slows and inflation softens.

The financial sector is viewed by many on Wall Street as a leading indicator for the broader market, given that it is such a big part of the S&P 500 SPX, -1.90% and of investor sentiment. Financials carried a 13.3% weighting in the S&P 500as of the end of February, the third highest of the 11 S&P 500 sectors, and without a healthy banking industry, companies would have a hard time borrowing to invest in future growth.

TimeFinancial Select Sector SPDR ETF24 Sep22 Oct19 Nov17 Dec14 Jan11 Feb11 Mar
 
US:XLF
$22$24$26$28$30

Although the XLF had by some measure entered a bull market before its current losing streak, as it closed Monday 20.6% above its 2-year closing low of $22.31 hit on Dec. 24, 2018, by other measures it remained in a long-term downtrend.

The XLF has failed to get above the highs seen in November, which was when the markets paused just before the broad December plunge, while the S&P 500 index broke out to early-October highs, closing Thursday within a few percentage points of its record close. The Dow Theory of market analysis, which has remained relevant with market technicians for a century, defines a downtrend as a chart pattern in which ease successive rally peak closes lower than the previous high, while each successive trough is lower than the previous low.

By that definition, the XLF has been in a downtrend for the past 14 months, as the successive rally peak in September was below its January high. Some technicians would call that a bearish divergence relative to the broader market, as the S&P 500 reached a record high in September. Read more about bearish divergences.

MW-HG225_XLFnow_20190322142202_NS.png?uuFactSet, MarketWatch

Frank Cappelleri, executive director and technical analyst at Instinet LLC, pointed out in a recent note to clients that since 2010, the XLF and the S&P 500 have not diverged from each other for very long.

See related: Why a bout of small-cap carnage could be a red flag for stock market bulls

Before that, however, in the months leading up to the financial crisis, there was a similar bearish divergence.

MW-HG223_XLF200_20190322142102_NS.png?uuFactSet, MarketWatch

If that’s not enough to trigger some jitters, then maybe the following chart will. When charted relative to the S&P 500, the XLF has been trending lower for a little over a year. This week, it broke below the December trough to hit the lowest levels seen since October 2016.

More here:
 

https://www.marketwa...ials-2019-03-22

 



#7 dTraderB

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Posted 23 March 2019 - 06:40 AM

YIELD CURVE INVERSION 101

Remember the YIELD CURVE inversion could easily be undone, then redone, undone, etc a few times during the next few weeks ....

 

 

 

By

WILLIAMWATTS
DEPUTY MARKETS EDITOR
  

A closely watched measure of the yield curve briefly inverted Friday — with the yield on the 10-year Treasury note falling below the yield on the 3-month T-bill — and rattled the stock market by underlining investor worries over a potential recession.

Read: 5 key ways Wall Street and economists think about the yield curve

But while that particular measure is indeed a reliable recession indicator, investors may be pushing the panic button prematurely. Here’s a look at what happened and what it might mean for financial markets.

See: Treasury yield curve inverts for first time since 2007, underlining recession worries

What’s the yield curve?

The yield curve is a line plotting out yields across maturities. Typically, it slopes upward, with investors demanding more compensation to hold a note or bond for a longer period given the risk of inflation and other uncertainties. An inverted curve can be a source of concern for a variety of reasons: short-term rates could be running high because overly tight monetary policy is slowing the economy, or it could be that investor worries about future economic growth are stoking demand for safe, long-term Treasurys, pushing down long-term rates, note economists at the San Francisco Fed, who have led research into the relationship between the curve and the economy.

They noted in an August research paper that, historically, the causation “may have well gone both ways” and that “great caution is therefore warranted in interpreting the predictive evidence.”

 
What just happened?

The yield curve has been flattening for some time. On Friday, a global bond rally in the wake of weak eurozone economic data pulled down yields. The 10-year Treasury note yield TMUBMUSD10Y, +0.00%  fell as low as 2.42% and remains off nearly 9 basis points at 2.45%, falling below the three-month T-bill yield at 2.455%.

Why does it matter?

The 3-month/10-year version that is the most reliable signal of future recession, according to researchers at the San Francisco Fed. Inversions of that spread have preceded each of the past seven recessions, including the 2007-2009 contraction, according to the Cleveland Fed. They say it’s offered only two false positives — an inversion in late 1966 and a “very flat” curve in late 1998.

Is recession imminent?

A recession isn’t a certainty. Some economists have argued that the aftermath of quantitative easing measures that saw global central banks snap up government bonds may have robbed inversions of their reliability as a predictor. Since so many Treasurys are held by central banks, the yield can no longer be seen as market-driven, economist Ryan Sweet of Moody’s Analytics, recently told MarketWatch’s Rex Nutting.

Meanwhile, recessions in the past have typically came around a year after an inversion occurred. Data from Bianco Research shows that the 3-month/10-year curve has inverted for 10 straight days six or more times in the last 50 years, with a recession following, on average, 311 days later.Is the stock selloff overdone?

The inversion was blamed by analysts for accelerating a stock-market selloff, with the Dow Jones Industrial Average DJIA, -1.77%  falling more than 450 points at its session low. It remains down more than 330 points, or 1.3%, while the S&P 500 SPX, -1.90%  was off 1.4%.

Archive: Here’s when the yield curve actually becomes a stock-market danger signal

Some investors argued that until other recession indicators, such as the unemployment rate, start blinking red, it’s probably premature to press the panic button. Also, many analysts see the Fed eager to avoid an inversion of the yield curve, which could prompt policy makers to move from standby mode toward easing mode.

“If [the inversion] is sustained and the Fed is not sensitive to that, it could become an issue,” said Ed Campbell, senior portfolio manager at QMA, in an interview.

https://www.marketwa...know-2019-03-22

 

 



#8 dTraderB

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Posted 23 March 2019 - 06:49 AM

One of the top FED analysts:

 

Tim Duy's Fed Watch The Federal Reserve wants to kill your recession call. Fed’s Pivot Marks a Major Break

The Federal Reserve this week effectively acknowledged that its final interest-rate hike of 2018 was an error. In trying to fix that error, policy makers have quickly shifted gears from forestalling inflationary pressures to supporting inflation and extending the expansion. The implication for market participants is to expect that the next Fed move is much more likely to be down than up.

Continued at Bloomberg Opinion….

 

https://blogs.uorego...-a-major-break/



#9 dTraderB

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Posted 23 March 2019 - 06:51 AM

The Fed Is Still A Threat To The Markets
Summary

The Federal Reserve downgraded its 2019 and 2020 economic forecast.

Various signs of economic slowing (not recession) are seen in the US, and ex-US things are weaker.

The Fed refuses to acknowledge that 9 interest rate hikes may have been excessive and continues to shrink its balance sheet, which usually grows with the economy.

Excess reserves will probably decline even when the balance sheet stabilizes.

Thus, the stock markets will follow.

Background

Beginning last July, I began tilting a bit toward bonds over stocks, though I liked them both. On July 16, I wrote How Bonds May Be Setting Up Bullishly (Here Comes Goldilocks?). I suggested that the aggressive Fed tightening could bring the 10-year Treasury bond down to 2.4% from about 2.84%. I was also hopeful (and remain hopeful) that if the Fed were not going to lower short-term rates, the bond market - in its wisdom - could keep the economy moving forward by pricing bonds higher; lower rates equate to higher bond prices. I also forecast that the spread between the 10-year and 30-year rate - then at 2.94% - would widen. Since then, the 10-year has finally come close to my 2.4% target, but the 30-year rate has risen a few basis points to 2.97% (all current rates are as of Wednesday late afternoon). Subsequently, when the global economy began to weaken, and Fed Chairman Powell began talking about the economy requiring not just a neutral Fed stance but a restrictive one, I sounded the alarm. In October, I wrote Yep, The Fed's Going Too Far, And Trump Has A Point: Analysis, and warned about risk of a stock market (SPY) crash, saying in the summary bullet points:

  • Based on commentary I have been providing since Q2 2017, the Fed was taking a big risk by raising rates while also deflating the base money supply.
  • In addition, a chart showing extreme leverage amongst margin speculators is presented, which poses crash risk if liquidity and sentiment go south simultaneously.

When more evidence that the Fed was too tight for the US and global economy we actually had, not the fantasy booming one the Fed was seeing, I contributed another article in early November titled Is The Fed Losing The Thread?, in which I concluded with a warning:

 

 

A possibly bigger risk to asset values is the reversal of QE [aka quantitative tightening or QT]. Because the Fed did QE to help the economy via a wealth effect, isn't reversing it bearish for the real economy? And since the wealth effect involved driving up equity prices, isn't the major goal of reverse QE to drive P/Es down? If so, why is this not being discussed non-stop in the financial media?

I, therefore, see this as a challenging period in the markets and possibly in the US economy.

We all know what came next: the Fed hiked rates in December into a market sell-off and possible global recession and certainly a global slowdown. And the SPY came down more than 20%. From a market standpoint, now that the FOMC has finally acknowledged the validity of the bond-friendly stance I have had since last July, since that July article, the SPY has underperformed a 7-10 year T-bond ETF (IEF) and 15-year T-bond ETF (TLH). A more relevant comparison is that the SPY has lagged a high-grade corporate bond ETF (LQD) by almost 4 points.

So far, I have done well keeping my equity allocation restrained since the January 2018 peak, and lowering it much further in October and November, while scaling much more deeply into intermediate-to-long term bonds. Now that interest rates are getting near my target, I'll share a report of what the Fed said Wednesday and how I look at risk-reward in the US markets.

The FOMC finally agrees Mr. Market was right in the Q4 sell-off

In its statement, the Federal Open Market Committee laid out a more restrained description of the economy, using the following terms:

  • growth of economic activity has slowed
  • slower growth of household spending and business fixed investment
  • inflation has declined.

The FOMC (Federal Open Market Committee) showed a downgrade of economic projections versus those it made in December:

  • real GDP growth for 2019 now seen at 2.1% versus 2.3% previously
  • real GDP growth for 2020 now seen at 1.9% versus 2.0%
  • unemployment rate is seen 0.2% higher for both 2019 and 2020
  • PCE inflation is seen 0.1% lower for 2019 and 2020
  • core inflation projections are unchanged at 2.0%.
 

The big shocker was that the median projection for the Fed funds rate dropped a large 0.5% for 2019, 2020 and 2021, now forecast at only:

  • 2.4% for 2019
  • 2.6% for 2020 and 2021.

This is a very big shift. Where the FOMC was seeing this year at 2.9%, it is only seeing 2.6% all the way through 2021.

A different, more graph-oriented, presentation of the above-linked document was also provided.

Details on reversing QE 3

The Fed continues to shrink the balance sheet, as described in a special, associated press release, Balance Sheet Normalization Principles and Plans. The Fed will continue reducing its balance sheet (i.e., the Treasuries and mortgage-backed securities it owns) at the current $50 B/month rate through April.

Beginning in May (presumably on or about May 1), it will lower that to $35 B balance sheet shrinkage, with the $20 B run-off of mortgage-backeds remaining the same, but with the rate of Treasuries allowed to run off the balance sheet declining from $30 B/month to $15 B/month. Then the entire balance sheet reduction is projected to end at the end of September.

Following that, the Fed will hold its balance sheet stable until the economy expands enough to allow the Fed to again grow its assets, planning (for now) to keep them near 17% of GDP. This is a historically very elevated level; when Chair Powell suggested this recently, I commented on its importance two weeks ago in How The Fed's Important Strategic Change Can Help Asset Prices. The bottom line of that article is that additional liquidity will tend to help keep stock, bond and/or commodity prices elevated. But:

The Fed will still be removing close to one-quarter of a trillion dollars of liquidity by the end of September (or beyond that as some trades settle later). Then, it plans to hold its balance sheet steady, but that may be negative for the markets, because a stable balance sheet includes what the Fed expects to be a growing amount of currency. Thus, excess reserves will tend to decline. It has been my contention for a long time that it is excess reserves (created by repeated rounds of QE) that were the proximate cause of high equity and high fixed income valuations. Thus, until the Fed's balance sheet gets to about 17% of GDP, I believe there will be monetary headwinds to asset prices.

 
Why equities still have headwinds

Longer term, it's great to talk about looking past the valley and staying with the main theme: build wealth best by owning growing enterprises rather than staying cautious in fixed income or perhaps gold (GLD). I'm doing that, but with an underweight in stocks, especially economically-sensitive stocks (since last fall, as I discussed in the above-linked articles). Two examples of why I'm cautious, in addition to the nearness of the "sell in May and go away" seasonal issue, follow.

Railcar loadings are slumping

From the AAR:

 

Total carloads for the week ending March 16 were 240,317 carloads, down 8.8 percent compared with the same week in 2018, while U.S. weekly intermodal volume was 260,684 containers and trailers, down 4.8 percent compared to 2018...

Total combined U.S. traffic for the first 11 weeks of 2019 was 5,659,091 carloads and intermodal units, a decrease of 1.3 percent compared to last year.

This is not looking robust at all. Neither is the Dow Jones Transport Average (DJT), which is down yoy and has been making a series of lower highs since peaking in September. And, neither is the weakness in home building (ITB).

The yield curve could be ominous

As of Wednesday evening, the 6-month T-bill, a rate which the Fed more or less controls, is 2.48%. But the 5-year T-note, which is less sensitive to the Fed's administered (short term) rate, is much lower at only 2.33%.

That's one caution. Another is shown by work from the San Fran Fed. As quoted by Hoisington and Hunt in their Q3 2018 newsletter. This reports that the San Francisco Fed performed research, which found that historically, the most accurate recession predictor of the interest rate spreads was the ten year-three month (10y-3m) spread. The authors note that a yield spread of less than 40 basis points (0.4%) generally predicted declining economic activity. The spread was above that, at 73 bps, in August, but the two Fed interest rate hikes and reversal of QE have met up with the global economic slowdown. Now, the spread is a minuscule 8 bps, with the 3-month T-bill at 2.45% and the 10-year T-bond at 2.53%.

 

The combination of the large inversion between the Fed's administered rates in the 3-6 month bills and the 5-year note, and the tiny spread between the 3-month bill and the 10-year bond, suggests to me that the Fed should not have raised rates in December and should cut them now.

Where is inflation?

The Fed noted that job growth has slowed lately, but it apparently is paying little attention to the Consumer Price Index, which is only up 1.5% yoy.

Transports are weak, housing is weak, inflation is a no-show, the yield curve is getting messy, interest rates are back to rock-bottom levels in Germany, the US, Switzerland and even Australia. Not only I, but the technicals shown next also suggest the Fed should have cut rates at this meeting:

Technicals

I will highlight two technicals, in addition to the divergence of the transports from tech (QQQ). One is the SPY itself: it has rallied to a difficult place, and when this happens while the bond traders are sensing weakness between 2 and 10 years, it's a warning (though the timing of the warning is unclear).

The other technical is the underperformance of smaller stocks, such as the Russell 2000 (IWM):

 

saupload_f8e03bca3a3bf67f47b58b369d1779dData by YCharts

 

The small stocks underperformed the generals in the 1998-2000 run, and that was a harbinger of a change of leadership and the need for a much easier Fed policy.

Something similar could be occurring now:

The Q's have been outperforming the SPY (as in the Tech Bubble), and both ETFs are up yoy, but the IWM is down yoy. I see that as a warning that the Fed has been squelching the markets and probably the real economy.

Conclusion: what, if anything, to do? Maybe bonds and biotechs

On the optimistic side of the ledger, the Goldilocks scenario that came into play several times since the Great Recession could be active again. On the pessimistic side, the yield curve could be signaling a recession or at least vulnerability to one. Absent a crisis, withdrawal of liquidity via the Fed's balance sheet normalization will continue at least until September, perhaps beyond as trades settle. Recent history, first with QE and now with reversal of QE provides what I consider ample evidence that this still-ongoing process poses headwinds for the prices of all financial assets, especially risk assets such as equities and commodities. Also important is to recall that the Fed did raise rates in December, and Chair Powell has recently stated that a rate hike slows the economy for more than one year. So, in addition to ongoing liquidity withdrawal, we have about 12 months more before the past year's rate hikes cease slowing economic activity.

 

These points plus all the above ones keep me underweighted in equities, with a defensive tilt to the names I'm long. One scenario that strikes me as more bullish, though, is healthcare in general and biotech (IBB) in specific. Some biotech stocks have gone nowhere for 4-5 years while their businesses have grown and matured. Biotech is only lightly affected by the global economy, and if liquidity is adequate, the sector might see flight capital that could leave cyclicals for the relative safety of growth-oriented health care names.

Finally, with interest rates so low now in the 5-10 year range, reversing the heavy overweight in bonds in that range makes sense to me.

In summary, I think the Fed erred by raising rates in December and should normalize the yield curve by dropping them 25-50 basis points. In the post-1982 halcyon days of 1983-2000, the linked article shows the frequent small moves the Fed made in the Fed funds rate as incoming data changed. There is no reason that the Fed needs to stay on autopilot. The bond market is saying that the Fed's policy rate is too high. What harm could come from trusting it, at least conditionally with full flexibility to hike whenever that appears right?

Thus, while I like the Fed's directional approach long term regarding excess reserves, I think that equities could suffer some summertime blues due to global and domestic economic slowing and ongoing double-barreled Fed tightness.

Thanks for reading and sharing any comments you wish to contribute.

https://seekingalpha...-threat-markets



#10 dTraderB

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Posted 23 March 2019 - 06:56 AM

Be careful of "SELL SELL SELL - the sky is falling" scenarios after a mere SPX 2% drop 

Markets do not go up & down in a straight line;  In daytrading, I actually do quick checks of the number of points traversed, up and down, retracements, pullbacks, breakouts... and keep a running tally. 

 

A Fully Inverted Yield Curve, And Consequently A Recession, Are Coming To Your Doorstep Soon
Summary

The FOMC's decision and dot-plot came in just as the market anticipated.

Still, it was quite remarkable to see the shift among Fed members in a matter of only three months.

The yield curve keeps on flattening all the way up to 10 years out. Interestingly enough, the long-end is actually steepening.

Bonds rally across the board, but investment-grade and long-duration have benefited the most from Mr. Dovish Fed.

On the other hand, the greenback weakened, assisting commodities - and crude oil specifically - to gain a lot of ground.

https://seekingalpha...g-doorstep-soon