Market Snapshot January 8, 2019
Good Tuesday A.M.,
Bonds taking another small beating today for the third day in a row. Two factors moving markets today, with neither of them being the Geico Camel commercial which I saw last night for the first time in a while. Caleb hasn’t aged at all but there is still something a bit funnier seeing him ask what day it is on a Wednesday not a Monday.
The two factors I’m thinking of are 1) the trade talks with China which, while we have not heard a formal word about them, the expectation is they are going “well” for the US and 2) I would give equal weight to the classic Fibonacci retracement we are seeing. You know what I mean right. Ugh. Talk about making it more complicated than it needs to be. Simple answer is that bonds improved about 240bps over the last 6 weeks. Stocks dropped an equal amount on their side. Markets need to blow off some of that steam/angst, etc. to be able to keep on keeping on in the same direction. That steam is in the form of a retracement. Classically a retracement looks like 33% to 50% of the initial move. We are currently at less than 25% in bonds. Yes, this could also be the beginning of a reversal but the 10-yr would need to close well into the 2.70s with mortgage bonds dropping another 30+bps from here before we would get nervous about that. Of course, best to play defense here but the news has been bond friendly and stocks are not seeing big gains.
Looking forward to hearing from the President tonight. Maybe that will give some additional insight into the trade talks and the wall.
Make today great!