Happy Birthday!

Happy Birthday!  Yesterday marked the 10 year anniversary of the stock markets' financial crisis low and stocks sold off.  Stocks slipped for a third day in a row as investors longed for a trade deal and pondered the future growth of the economy.

WHAT YOU NEED TO KNOW:

1)  The EU economy is losing steam.  WHILE YOU SLEPT reports emerged suggesting that the European Central Bank will cut its growth forecasts.  Many expect the forecast to be cut to +1.3% from +1.7%.  Additionally the ECB is reportedly discussing the possibility of increasing loan facilities to banks in a move to help bolster the economy.

2)  The US economy is cooling a bit as well.  According to yesterday’s Federal Reserve Beige Book, a survey of economic conditions across all Fed regions, it highlighted an economic slowdown in January and February, which was likely prompted by the government shutdown.

3)  The global economy may be slowing down.  The Organization for Economic Cooperation and Development (OECD) announced that it cut global growth forecasts to +3.3% for 2019 citing concerns about  EU growth, which it forecasts to be just +1.0%.  The forecast is consistent with the Fed’s concern’s of global economic "cross currents”.  John Williams, an influential Fed Governor from NY, highlighted the Fed’s decision to slow down the rate hikes in response to potential slowdowns in a speech yesterday.

4)  The US trade deficit is growing.  Despite all the rhetoric and effort on the part of the Administration to decrease the gap in trade, the deficit actually grew to a record level in 2018.  Yesterday, the Commerce Departments released trade deficit numbers for December and the deficit increased by a greater than expected -$59.8 billion to a total of -$891 billion for the year.  While this may appear bad on the surface, the trade deficit typically expands when the US economy is growing.  More money in consumer pockets combined with optimism usually leads to increased purchases of foreign goods.

Stocks slipped yesterday as investor anxiety grew about an impending trade deal between the US and China.  Of course there was that barrage of not-so-flattering economic releases yesterday, which the market largely ignored.  Ten years ago yesterday, the stock markets hit their financial crisis lows when the S&P 500 hit a low of 666.79.  The S&P500 rose by around +305% since that low point.   An investment made at the lows ten years ago would have seen your money grow by 5 times, if you include compounding and reinvested dividends.  The moral of the story?  A long term approach pays! Yesterdays’ market slip saw the S&P500 trade off by -0.65%, the Dow Jones Industrial Average sell off by -0.52%, the Russell 2000 sink by -2.01% (that’s not a typo), and the NASDAQ 100 fall by -0.62%. Bonds rose in yesterday’s session with the 10 years treasury yield falling to 2.69% and the 2/10 yield curve was at +17.5 basis points.

WHAT TO LOOK FOR TODAY:

This morning we will get a read on consumer credit from the Federal Reserve.  Consumer Credit is expected to have grown by +$17 billion in December, up slightly from the prior month’s growth of +$16.554 billion.  For more information on credit bubbles, read my note on the topic here: https://www.siebertnet.com/blog/index.php/2018/09/12/let-the-music-play/ .   Fed Governor Lael Brainard will be speaking midday.  Before the bell we will get earnings from National Beverage, Kroger, and Burlington Stores amongst others.  After the bell earnings will include semiconductor maker Marvell Technology and Costco.

daily chartbook 2019-03-07