Mike’s Morning Brief – October 17, 2018

What’s going on in the world…

Market opens lower on the heels of a powerful rally yesterday, which went a long way to erase some of last week’s losses. It was a 90% up day. It was the best day for the S&P and DOW this year. The DOW was up over 500 points. Both jumped 2%. The Tech-heavy NAS led the charge, up nearly 3%. Volatility is the theme. Investor confidence is being shaken again. There is a summit in Europe being held today with many issues to discuss. Perhaps the biggest is the fate of Brexit, which is set to take place in 5 months. There is still no deal in place. European markets, particularly banks, are feeling the squeeze and stress. Another positive sign on trade, talks are picking up for a new deal between Europe and Japan with the United States. There has certainly been positive movement on this topic. The biggie still remains China. I covered this issue extensively in the Friday piece. China continues to reduce its holdings in US Treasuries. Interest rates seem to be settling in after the big move this month. The 10-Year Treasury is at 3.15%, backing off the 3.24% level hit last week. That was a 7-year high, driving mortgages and other loans upward. President Trump continues to criticize the Fed for sending rates higher, threatening economic growth. Gold is catching another bid in early trading. The precious metal has come back to life in October. Is it back to being a safe haven from stocks or a hedge on inflation? Good question. All correlations have broken down over its 7-year Bear. But the hibernation seems to be over. Remember this. Crude prices are lower, but set to go higher based on increased demand and questionable supplies in the Middle East. Earnings continue to pour in, which is helping put a bid under stocks again. But not all companies are doing well. IBM continues to struggle. The company just can’t seem to grow, which has the stock shrinking. It is down 6.5% in early trading, alone accounting for over 50 DOW points. Recreational marijuana is now legal in Canada, the first G7 nation to embrace it. There is a lot of momentum in cannabis. We expect more volatile price action ahead. Keep those belts buckled.

Have a great morning,

Mike Frazier

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