Market Snapshot Wednesday June 5, 2019

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Good Wednesday A.M. on this best day of the week, 

 

There are a few things on my mind to mention today after yesterday’s rebound in stocks and sell off in bonds..

 

  1. Fed Chairman Powell made a clear statement to markets that the Fed is watching the trade wars and will act as necessary (I think he means he is going to lower rates in September)
  2. There is still no deal with China, Congress is threatening Mr. Trump that they will veto any Mexican tariffs which he can/will override with an emergency order
  3. Prime Minister May is resigning later this week and the UK will likely leave the EU.
  4. ADP payrolls came out this a.m. and were a big miss, markets were expecting 180k, the report was 27k. Tough to grow without new jobs. This now becomes another consideration for the Fed. This is the worst ADP report since 2010
  5. Yield curve continues to invert at a steeper angle. I don’t buy the rhetoric that its not meaningful in today’s economy. We should always have a bigger return when taking a longer term investment. I am concerned how this looks in 12 months.

 

So with these bullet points, the 10-year is back to 2.11% today and I suspect there is a good chance it will drop below 2.10% by today’s close. Mortgage bonds are up a bit as well. The 2-year is outperforming the long end (steepening the curve inversion). This is due to increased expectations that the Fed will ease rates soon.

 

Additional reports and events this week include Thursday weekly jobless claims and European Central Bank announcement; and Friday non-farm payroll report.

 

I think it is a cautiously wait and see call for now.

 

Make today great!