Tuesday – September 3, 2019

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Market opens lower to begin September, historically the worst month on the year for stocks. Trade fears and falling rates continue to be the themes driving downward pressure on stocks. New tariffs were implemented by both the US and China over the weekend. The US Market is getting caught up to global trading after being closed for Labor Day. Asia closed mixed overnight and Europe is lower. The Dollar continues to strengthen, with the DXY above 99 for the first time since the Spring of 2017. The British Pound Sterling weakness is a big story in FX, extending recent losses and trading at its lowest versus the Dollar since October 2016. It is now trading at $1.20. The road to Brexit is getting more and more complicated with snap elections looking very possible. The Hong Kong situation remains highly volatile after Chief Executive Lam denied she asked Beijing to let her resign. On the US-China trade front, after tariffs went into effect Sunday, President Trump said talks are still ongoing and face-to-face negotiations planned for September are still on. However, media reports say officials are struggling to agree on a meeting schedule after Beijing’s request to delay tariffs was denied. The sides seem very far off and the Market is sensing it more and more. Hurricane Dorian did significant damage to the Bahamas, with swirling winds pushing 200 miles per hour but the storm sat over the islands and at one point only moved 1 mile an hour. Florida is bracing for the storm. Disney is closing its parks early today. North Korea said the window for diplomacy with the US is closing. There’s a lot going on right now. A slug of economic data will be reported in September, starting with the Job report on Friday. Central bankers will be active too, with policy meetings on calendar this month. Another rate cut is expected by the Fed. How deep is the question. The Market wants 50 bps minimum. Stocks are lower, Bonds are higher. Yields keep falling, with the 10-Year Treasury back below 1.5%. The 30-Year Treasury is below 2%, the lowest level ever. Gold continues to be a safe haven and is higher in early trading. The 2900 level on the S&P will come into play again this morning. 2940 failed for the 4th time as stocks have grinded in a very tight, yet volatile range in August. Growth is slowing and the economic cycle is maturing. Central bankers keep trying to prop asset prices up, but ultimately the cycle will win out in our estimation. We are keeping our defensive positioning as we expect September to bring more volatility with a downward bias until the serious issues get addressed. Volume is picking up, which has been the case for the down days. We expect volume to swell now that Labor Day is behind us. Keep those belts buckled.

Have a great morning,

Mike Frazier

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