Mike’s Morning Brief – April 11, 2018

Mike talking on the phone

What’s going on in the world…

Market opens lower, giving up a chunk of yesterday’s gains, as the chance for a military confrontation in Syria is rising. Yesterday’s rally was driven by the seeming diffusion of trade war threats with Chinese President Xi cutting the tariffs on cars among other goods. That brought some serious reprieve. But the issue is far from over. The whipsaw price action is driving investors nuts, but it is part of the process. There have been eleven 1% moves in last thirteen trading days! Yesterday was the 20th intraday gain of at least 1% so far this year. That’s the most for any comparable period since 2009, when major indexes were rebounding from their crisis-era lows. Mark Zuckerberg survived round 1 of the Congress roasting, quite well actually. Lucky for him, Americans despise Congress more than they dislike him. Today will be tougher in front of the House Energy and Commerce committee. House Speaker Paul Ryan said he won’t seek re-election in November, a big blow to Republicans, and creates a huge vacuum for leadership in the House. Earnings Season officially begins on Friday with the Big Banks leading off with Qtly reports. The numbers are expected to be good. Corporate America is in great shape. The US economy is solid and strengthening. The fundamentals are solid. Washington is a completely different story and the risks overseas are growing. The Market cares more about earnings and global trade. But it is no longer ignoring politics and geopolitics, because they do matter. The Fed releases its minutes from the March meeting, Jay Powell’s first as Chairman. Crude is rising again with the Syrian news, and increasing demand in Asia. Interest rates are falling as money is flowing back to Bonds as a safe haven. The 10-Year Treasury is back down to 2.7%. Gold is jumping for the same reason, and looks primed for a serious breakout. Stating the obvious, there are so many complex and critical issues at hand. The Market is trying to absorb developments and price in the effects. The volatile price action reflects it. Yesterday saw another big rally, and this time it held. This morning it is giving some of it back. The whipsaw action is jerking investors around. But this is not abnormal behavior. It’s become a little extreme of late, but remember, 2017 was a complete anomaly for the lack of volatility.

Have a great morning,

Mike Frazier

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