Why The 10 Year Bond Yield Will Fall

Stocks Have Another Failed Rally In the past 4 days, stocks have peaked in the morning and then fallen in the afternoon, sometimes into the negatives. I think there is a technical battle between those who want the market to retest the recent trough and those who want the market to make new highs. On…

The Short Treasury Trade Is Over Crowded

Wal-Mart Margins Shrink Wal-Mart stock fell 2.75% on Wednesday as the stock is in complete free fall. It’s down 16.46% since January 29th. I don’t think the selloff in Wal-Mart signifies overall weakness from the consumer because the same store sales growth was fine. There are 3 main causes of the decline in WMT. The…

FOMC Minutes Sends Stocks Up & Then The Dollar Pushes Stocks Down

Fiscal Stimulus Bails Out The Fed At face value, the equity market’s initial reaction to the Fed Minutes was very confusing. The Fed boosted its economic projections and said it expected “further gradual rate hikes.” Objectively, these are hawkish statements. The market rallied on signals of further hikes even though a few years ago it…

Best Positive Guidance Since At Least 1996

EPS Guidance Looks Spectacular Q4 2017 earnings are shaping up to be great. These results support this bull market. There are many investors who argue that earnings don’t matter. There is always going to be short term action which doesn’t work in concert with earnings growth, but that’s not a sufficient argument to say earnings…

Wal-Mart Crashes While Small Businesses Flourish

Wal-Mart Stock Crashes The biggest news item of the day on Tuesday was the crash in Wal-Mart stock after disappointing earnings. The stock’s decline of 10.18% was its worst trading day since January 1988. This decline made the Dow the worst performing of the major indexes. Earnings per share were $1.33 which missed the expectation…

Stock Market To Peak In 2019 Or Later?

Declining Labor Momentum The chart below shows the net number of states with increasing or decreasing unemployment rates. This is like a breadth indicator for the labor market. As you can see, there are about 23 more states with decreasing unemployment rates than increasing rates. The number likely declined because of the weakness in energy…

Stocks Rally Along With Yields

Home Buying Conditions Weakening The chart below shows the upper income home buying conditions compared with autos and large household durables. The chart aims to show the business cycle is ending because the buying conditions have fallen below the autos index. I think this indicator isn’t that great. As you can see in 1995, it…

Gold Rallies While U.S. Real Estate Falls

Tech Leads The Way The table below shows the year to date performance of a few different assets. As you can see, the tech sector has done well which is consistent with their mostly great earnings reports. The sector outperforming the market during the correction is a good sign because tech needs to be the…

Inflation Is The Main Story Of 2018

Retail Sales Hurt GDP As it turns out, Q1 2017 had poor GDP growth because of weak consumer spending growth. The poor January retail sales means Q1 2018 might have weak GDP growth. As a result of the retail sales report and the CPI report, the Atlanta Fed GDP Now estimate for real consumer spending…

Is The Economy Entering Stagflation?

Stagflation Fears Not Valid Yet The two top stories of the day on Wednesday were the retail sales report and the CPI report. The combination of a weak consumer and heightened inflation brings about the fear of stagflation which is a stagnant economy and high inflation. This is probably an extreme worry because we’re far from reaching…