Mike’s Morning Brief – March 27, 2019

What’s going on in the world…

Market opened flattish after another whipsaw day yesterday which saw large gains nearly completely get erased while closing substantially in the green. Early gains turned to losses fairly quickly. Slowing global growth and the inverted yield curve has been sending shockwaves throughout the financial system. Of course, so many investors and strategists are hitting the circuit defending this Market and talking about how this time is different. Maybe. The Fed has clearly changed its tune and has signaled its intent to defend the US Economy and the US Stock Market. The problems overseas have no simple solution. And the strength in the US seems to be slipping a bit. Was 2018 as good as it gets? Economic and earnings growth accelerated to multi-year highs. Unemployment fell to multi-year lows. Those rates are seemingly unsustainable. But money has poured into the US for a decade. IPO’s are a big theme again, as these young companies try to tap the capital markets while they’re still hot. Sign of a top? History has shown there is a relationship with hot IPO’s and Market tops. The Qtr might be locked-in with window dressing for the final three days, which could keep a bid under it. But Earnings Season will be picking up again in April, and the growth will likely have shrunk quite a bit. The question is not necessarily what is reported. What is perhaps more important is what’s expected. Expectations seem all over the place right now, which has contributed to the volatility. Interest rates continue to slide. German 10-year yields, already below zero percent since Friday, fell further into negative territory, while the U.S. bond yield curve remained inverted. The Dollar is ticking higher while WTI is hanging out around $60, the highs on the year. Only 6.45 billion shares traded on NYSE and the Nasdaq Tuesday, the second-lowest number so far this year. That isn’t a resounding endorsement for a bullish backdrop. You’d expect large volume with conviction if we are about to break out. The opposite might be about to occur. Low volume can bring higher volatility. Keep those belts buckled. We see more turbulence ahead.

Have a great morning,

Mike Frazier