Market Snapshot July 8, 2019

summer1

 

Good Monday AM,

 

Markets took a hit on Friday as the junior traders on the desk (day after the holiday) tried to assess the stronger headline on the jobs data (rest of the report was weak; the report showed 224,000 new jobs reported in June considerably higher than forecast of 165,000). Unemployment rate rose to 3.7% as 335,000 individuals entered the job market. Wage growth was still stagnant at 3.5% annually. Conservatism was the right call and that is what we got. The 10-yr pushed over 2.05% (up 10bps) and mortgage bonds sold off .25%. Today with more of a full staff, trading is more normalized.  The 10-year yield is trending lower (back to 2.03%) and Mortgage bonds have halved Friday’s losses up 12bps. Prior to the jobs report, markets were expecting a 50bps rate reduction from the Fed at their next meeting. As of this a.m., it is now more likely to be .25% (why bonds have pulled back). Mr. Powell starts a two-day event with congress tomorrow and I would not expect rates/bonds to improve until at least midway through tomorrow’s testimony. Everyone wants to hear from the band leader first.  It’s probably a good idea to float until (at least) tomorrow as bonds are slowly rebounding from Friday, but nothing is for certain.

 

Additionally, there are a lot of geopolitical risks piling on which are likely to hurt equities (not sure how much love bonds will get from them yet):

 

  • Iran trying to move their nuclear capability forward, busting up the 2015 nuclear accord/agreement and have the EU/Russia take sides against the US.
  • Tariff war with China ongoing with no resolution. What was cheered at the G20 as a path forward came to a halt when China said it would not negotiate with the current tariffs in place (we can assume where this is going).
  • Brexit

 

Make today great!