Mike’s Morning Brief – September 18, 2019

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What’s going on in the world…

Market opens flattish ahead of a highly anticipated Fed meeting. Interest rates are lower in early trading. A rate cut is no guarantee however. In fact, yesterday, the Market was assigning a lower than 50/50 chance of a 25 bp cut. That number is now at 70% as I type, perhaps FedEx cautionary comments on the global economy and the increased sanctions on Iran are contributing to the increased likelihood of another rate cut. The US Economy has been holding on remarkably well, while the rest of the world struggles. But there are so many pressures out there that can infect American economic activity. We remain guarded on that topic. The Repo market is showing signs of stress as the NY Fed had to provide emergency liquidity overnight to meet cash demands. This is the first time it’s happened since the Financial Crisis. We are studying this closely to see if there is something more concerning going on, but on the surface this is not positive. Tensions are heating up between South Korea and Japan, who are in the midst of their own trade war. It’s not getting the due coverage, but this could be a huge sleeper of an economic issue as the world is impacted by these Asian nations for manufacturing and supplies. The election in Israel is still too close to call, which will certainly have great influence on Middle East policy. One would think the attack in Saudi Arabia over the weekend would help Netanyahu as he emphasizes national security amongst his greatest strengths and accomplishments. President Trump said a deal with China could come soon, or maybe ahead of next year’s election. He went on to say that a deal before the election will be worse for China. Yesterday marked the 3rd time in the last ten sessions the S&P spiked in the final 30 minutes of trading for seemingly no reason. Yesterday the index traded in a tight 5 point range all day before bouncing 8 pts from 12:30-1pm. It’s giving those gains up quickly this morning. Stocks are lower. Bonds are higher. Gold is higher as is the Dollar. Oil is lower. Any of these could easily reverse at any point or extend their moves more. Expect wild price action around 11am our time and the volatility to continue with the torrid news flow.

Have a great morning,

Mike Frazier

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