Mike’s Morning Brief – November 20, 2019

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What’s going on in the world…

Market opens in the red as sources suggest that even phase 1 of a trade deal is at risk of another standoff. The Senate unanimously passed a Hong Kong rights bill directed squarely at China. Beijing has already warned it will take countermeasures and Vice President Pence warned it would be difficult to sign a deal if Hong Kong demonstrations are met with violence. On again, off again has been the way this whole time. The Market cares about trade, but is not assigning a huge probability that any deal is evaporating yet. Back at home, there’s expected to be some fireworks on Capitol Hill with a big day in the impeachment inquiry. Retail earnings continue, with a much stronger tone from Target and Lowe’s than was reported yesterday by Home Depot and Kohl’s. The American Consumer is still spending. The US House has passed a temporary government funding bill that will fund the government through December 20. So they’ll be doing it again before Christmas. Speaking of kicking the can down the road, Brexit is back in focus. There was a televised debate last night between Prime Minister Boris Johnson and Labour’s Jeremy Corbyn. A snap poll gave Johnson a narrow win at 51% to 49%. It appears to be a draw, but in this case, a draw is a win for Boris. The December 12 vote will be huge. Economic data continues to struggle overseas. Japanese exports suffered the biggest drop in October in 3 years. Taiwan export orders fell for a 12th straight month, though at a slightly slower pace than expected. German PPI came in a bit softer. Global markets finished largely in the red, led by Asia and the UK. The Technology sector hit a new all-time high, and a +2.21% jump in the Biotechnology ETF (IBB) helped Healthcare also hit a new high. That helped keep the small-cap Russell 2000 positive, but the index struggled to clear the 1600 hurdle again, finishing at 1598.29. That has been a brick wall of resistance for small caps, and it proved it again yesterday. The Fed Minutes for its October meeting will be released today, providing a little more insight as to where monetary policy is headed. It seems pretty clear, the bar is quite high for another rate hike and is perhaps getting lower for a rate cut. The Stock Market is addicted to the Fed medicine. Stocks are in the red. Bond prices are in the green. Gold is flat. Oil is higher. The Dollar is neutral. There’s a lot going on, and this Market keeps pricing in a lot of good, and seemingly ignoring so many risks that could lead to bad. Volatility has been crazy low. We think that changes, and soon. Hang on for the ride.

Have a great morning,

Mike Frazier

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