Monday – July 8, 2019

By July 8, 2019 Dark and Early

Market opens lower to start the new week. With the Market near all-time highs, the stronger than expected jobs report for June complicates the rate cut plan for July. The Market has clearly already priced it in. The Fed continues to find itself in a tough spot, with a US Economy which seems to be chugging along just fine, a Stock Market at all-time highs, an unemployment rate at 5-decade lows and a President that relentlessly hammers the Chairman. It seems to be an unwinnable situation for Powell, who speaks on Capitol Hill this week. All eyes will be on the Fed Chair. It is by far the biggest event for Wall Street this week. Earnings Season begins next week, and expectations seem to be all over the map. What is clear, the growth rate is decelerating from the unsustainable levels from last year. Another complication for this Market to digest is the radical move that Deutsch Bank did over the weekend. The once Financial Titan of Germany continues to sink further and announced it will exit the global equities business and cut 18,000 jobs worldwide. Europe continues to face major challenges, and Germany has been considered the backstop all along. This is not good. Global stocks were lower overnight, with the Shanghai Composite leading declines, down 2.5%. Interest rates are lower in early trading, with the 10-Year Treasury yield at 2.01%. Gold and the Dollar are catching a bid while Oil is marginally higher. Iran has increased its uranium enrichment beyond the limit allowed by its 2015 nuclear deal. How the world reacts will be critical, as tensions continue to be sky-high in the region. Volume was the lowest of the year last week. It isn’t expected to increase materially this week, and lower volume can create excess volatility. That would mirror the geopolitical developments which seem to be getting more complicated and dangerous.

Have a great morning,

Mike Frazier