Market Snapshot May 15, 2019

beach
Good Morning on this fantastic and best day of the week, Wednesday,
 
The 10-year yield this morning has fallen to 2.38% based on 1) Italy’s debt problems, 2) poor economic data here and 3) poor data on China industrial production. The yield has returned to levels at the end of 2017 when 2.39% served as a ceiling during the last half of that year. Retail sales decreased in April and missed forecast indicative of potential reduction in economic growth. Sales decreased 0.2% (that’s a -.2%) versus forecast of 0.2% increase and following 1.7% increase in March. Core sales were unchanged after growing 1.1% in March. Core sales correspond to consumer spending component of GDP and consumer spending accounts for almost 70% of economy. Business Inventories, a key component of GDP, was unchanged in March and met forecast. The March data reduces concern of a build-up after the 0.3% increase in February.
 
Additionally and not to be overlooked, Italy said it would break EU rules for its proposed budget in order to spur jobs. Traders are increasingly worried about Italy’s solvency.  This creates safe-haven buying in German Bunds and other core sovereign debt.  It also spills over to help US Treasuries. 
 
The White House this am is sharing that Mr. Trump is delaying the start of Tariffs on autos and auto parts for several months. That has recently turned stocks from negative to positive and has taken a little wind out of the Bond sails. Traders are hoping to delay the pain as long as they can which is understandable. We’ll see what the next tweet reads
 
Unless I am missing something, the fundamentals/data are showing a slowing global economy and concern that tariffs will fuel the slowdown. The Fed should be ahead of this and lower rates. I am not sure how much will float into the bond market and into rates but for now, the trend is our friend.
 
Make today great!