Author: admin

The bull market for stocks turns nine years old on Friday: while the S&P hit its famous “generational” intraday low of 666.79 on March 6, it was not only three days later, March 9, 2009 that the S&P actually closed at the post-crisis low price of 676.53. The gains since – uninterrupted by a drop of 20% or more – rank this bull market stretch as the second longest ever and about 6 months behind the bull run from October 1990 to March 2000 during the tech boom.

So “as a bit of fun” Deutsche Bank’s Jim Reid decided to take a look at the “winner and losers” over this period, and has updated his usual performance review charts for the 9 year period since that historic moment.

As shown below, the S&P 500 has actually outperformed all other assets in the bank’s sample, delivering a total return of a whopping 389%. The Russian MICEX (+369%), Hang Seng (+271%), Nikkei (+256%), DAX (+235%) and Stoxx 600 (+226%) follow with similarly impressive returns. Only one equity markets is in negative territory over that time and, not surprisingly, it’s the Greek Athex (-34%).

It’s paid to be in credit markets too with returns anywhere from +57% (EU Fin Sen) to +209% (EU HY). Sovereign bond markets have lagged although returns are unsurprisingly still positive. EM Bonds (+77%) and BTPs (+61%) stand out the most while Treasuries (+23%) have underperformed.

Commodity markets on the other hand are a lot more mixed. Copper (+88%) prices are up, along with Gold (+43%) however Brent (-43%) is the biggest underperformer in the sample of assets.

All in all 35 out of the 39 assets in Deutsche Bank’s sample (which sadly excludes cryptos) have delivered a positive total return in local currency terms with the average return a fairly staggering 111%.

 

Looking at the same dataset, BofA CIO Michael Hartnett notes that this has all been due to one thing: QE, which has delivered “big global annualized returns since QE start Mar’09…stocks up 16%, HY bonds 13%, IG 7%, govt bonds 3%, cash 0%; global stock market cap up epic $60tn to $90tn.“

Hartnett also looks at the next milestone, although here he is a little more skeptical: with just 116 trading days until the S&P500 hits the longest bull market all-time, he is worried that bullish QE is peaking. After all, Fed/ECB/BoJ have bought $11tn of financial assets since Lehman, and yet in ‘18 Fed sells $400bn, ECB tapers Sept, by year-end Fed/ECB/BoJ asset purchases turn -ve YoY.  When will stocks notice?

Other, such as Reuters, are more sanguine, and in a note this morning the newswire notes that “the bull market for stocks turns nine years old on Friday and, despite being long in the tooth, appears poised to set the record as the longest in history, buoyed by global economic growth and stronger company earnings.“

“Bull markets just don’t die of old age, they die of recessions and economic slowdowns,” said Art Hogan, chief market strategist at B. Riley FBR in New York.

“The earnings growth picture for this year continues to get better on a weekly basis,” added Hogan.

Still, not everyone is convinced: The strong earnings growth could turn into a headwind, however, as results this year will be tough to top in 2019. “When you look to 2019, it’ll be very hard to repeat those numbers,” said Jonathan Mackay, investment strategist at Schroders Investment Management in New York.

“Next year will probably not be as good. Then you’re probably getting into the last stages of the cycle.”

Concerns about an overheating economy could further derail the bull market: “If your economy can’t handle that growth that quickly, then we run into shortages and then we have a business cycle on our hands,” said Jack Ablin of Cresset Wealth in Chicago.

But the biggest concern, at this point, is the shift from “QE to protectionism” according to BofA: the possibility of a global trade war in light of recent tariffs announced by the Trump administration are also cause for concern.  “Obviously anything trade talk, political event risk, certainly could create problems but right now there is certainly a valid concern out there that ripping up NAFTA would create a whole litany of uncertainties,” said Ablin.

According to Hartnett adds, “as QE ends, protectionism begins; War on Inequality to be fought via Protectionism, Keynesianism, Redistribution; monetary & fiscal policy now spent leaving markets to discount Protectionism & global tariffs.”

In other words, the fate of the bull market, and whether it becomes the longest in history, is now squarely in the hands of one man: Donald Trump. And, incidentally, should stocks crash, it will also be on Trump: he now “owns” the market, and anything that happens in the next few years.

via RSS http://ift.tt/2IhZnNO Tyler Durden

Authored by Kevin Muir via The Macro Tourist blog,

I would like to take you back to 2012. Just a few short years after the soul-searching-scary Great Financial Crisis of 2008-9, market participants had finally given up their worry of the next great depression enveloping the globe, but had replaced it with an equally fervent fear that inflation would uncontrollably explode.

The Federal Reserve had recently completed their second round of quantitative easing, much to the chagrin of a large group of distinguished economic thinkers who had gone as far as writing an open letter to the Fed Chairman pleading he reconsider the program.

You remember that old A&E show Intervention? Well, this was like an academic peer episode – more neck beards and sophisticated language, but sadly, the same amount of crying.

So when the Fed’s favourite inflation gauge, the Core PCE index, spiked up to 2% in 2012, it was especially hard on Chairmen Bernanke. After all, his colleagues had just warned him that this was about to happen.

Like any good addict, Bernanke insisted he had his usage under control.

In fact, during a 60 minutes TV interview, when faced with the question about how confident he was that he could control inflation, he responded – “100%.”

Yet, here was Bernanke, staring down the barrel of 2% inflation, having done nothing to prepare the market for higher rates. He believed the inflation was “transitory” and it would be a mistake to nip off the budding recovery with tighter monetary policy.

The hawks went ape-shit. They screamed and yelled. They warned about Weimar Republic style hyper-inflation. But Bernanke hung tough.

This was bold. It took guts.

Now you might think it was wrong – so be it. I am not so omniscient to give judgment, but more importantly, it’s in the past, so arguing is about as interesting as when your 98-year-old grandma tells you that she was once “quite a dish.” Yeah sure, it might be true – but it ain’t doing anything for anyone today.

I am more interested in what this might mean for markets going forward.

This episode provided an important “lesson” for markets. I think that Cullen Roche’s admission was symbolic of the change of thinking that went through financial circles – The “Transitory” Inflation… Bernanke was right.

I don’t often give Ben Bernanke a lot of credit for the job he’s done. I am admittedly hard on him and perhaps unfairly so. But he deserves some serious credit for his persistent comments on inflation in the last 24 months. Dr. Bernanke was mercilessly mocked in some circles for calling the surging commodity prices following QE2 “transitory”. In early 2011 he was cited:

“I think my take on inflation right now is that we are indeed seeing some increases, obviously,” Bernanke said. He attributed them to “global supply and demand conditions.” But he reckons these prices “will eventually stabilize.”

“I think the increase in inflation will be transitory,” Bernanke said. But we added: “we have to monitor inflation and inflation expectations extremely closely because if my assumptions prove not to be correct than we would certainly have to respond to that.”

He was further mocked by some who said the inflation would prove global in nature and that the impact would eventually spread to the USA. But this excellent chart below from Also Sprach Analyst shows that Ben Bernanke was very right about inflation. He deserves a great deal of credit for his prescience on the inflation front.

How this will affect markets in the coming years?

Although I believe the next surprise will be disappointing global economic growth, and not the other way round, I come from the Yogi Berra school of forecasting – “it’s tough to make predictions, especially about the future”, so I fully accept the possibility that inflation might take off in the coming quarters.

But I want to highlight that the stage has already been set for the Federal Reserve to “look through” those increases. Don’t expect Core PCE ticking above 2% to alter the Federal Reserve’s course. After all, I am sure that Bernanke has passed down the secret recipe for being able to 100% control inflation to Powell. No need to worry. Trust him, he just uses it recreationally.

via RSS http://ift.tt/2FBCrub Tyler Durden

After 7 straight months of growth, wholesale sales tumbled in January – the worst drop since Jan 2016.

On the other side of the wholesale picture, inventories rose 0.8% MoM (more than the expected 0.7% build), the highest since August 2017.

Which is likely to prompt upgrades for Q1 GDP.

Of course this divergence between sales (dropping) and inventories (building), sent the inventories/sales ratio up by the most in 3 years…

 

via RSS http://ift.tt/2tzXGYI Tyler Durden

While February was expected to match the January payrolls number at best, the February payrolls print was a blockbuster, blowing expectations out of the water with 313K jobs added, over 785K according to the Household Survey, and a record 1 million full and part-time jobs.

So which sectors were responsible for the surge in February employment? The key highlights: virtually every industry added jobs in February, with a particular focus on construction workers, which added a whopping 61K jobs in February…

• Construction: +61K
• Durable Goods: +32K
• Retail: +50K (Big Building Materials and Department Store non-firing)
• Professional Services: +50K (solid temp workers of +27K)
• Government: +26K (Schools +27K)

… with the exception of information, which saw a drop of 12K jobs.

Some other notable changes:

• Manufacturing: +31K
• Healthcare: +9K
• Mining: +9K
• Financial Activities: +28K

Commenting on the data, SouthBay research noted the following:

• Construction: Much higher than expected.  Homebuilders are hiring and the bottlenecks I saw did not show up in BLS data
• Manufacturing: Higher than expected.  My data shows demand is strong but more moderate
• Financial: Higher than expected.  More lending and sales agents

What was also quite notable was the sharp, +50,300 jump in retail jobs, which according to the BLS, have wiped out the doldrums from the recent bricks and mortar collapse, and are back to record high.

Southbay’s summary: “Broad strength.  Notable strength in the supply chain (manufacturing, transportation) and consumer (home construction, Lending, Retail, Leisure & Hospitality)“

Finally, as Bloomberg shows, below are the industries with the highest and lowest rates of employment growth for the most recent month: monthly growth rates are shown for the prior year.

via RSS http://ift.tt/2FoBztH Tyler Durden

During a routine Congressional hearing on Wednesday, US military leaders publicly admonished Russian President Vladimir Putin for unveiling six powerful new weapons during his annual address to lawmakers, including what’s believed to be a modified Iskander ballistic missile capable of defeating US and NATO anti-ballistic missile systems. Using Putin’s escalation as one more justification for asking that all of the appropriations requested in the Defense Department budget be assiduously met.

Commander of US Strategic Command Gen. John Hyten, said Putin’s declarations were “not surprising” and that he was “disappointed” the Russian leader would use these weapons tests to “further intimidate and coerce” the US.

Taking the hint from the generals that, unless the US makes a good-faith effort to address some of Russia’s grievances, an arms race between the two countries could cost a ton of money, a group of lawmakers published a letter on Thursday calling for the US to engage in a “strategic dialogue” with its purported election-hacking nemesis, arguing that the matter is “more urgent” following Putin’s unveiling of his new weapons systems, according to RT.

“A US-Russia Strategic Dialogue is more urgent following President Putin’s public address on March 1st when he referred to several new nuclear weapons Russia is reportedly developing, including a cruise missile and a nuclear underwater drone,” reads a letter signed by US Senators Edward J. Markey Jeff Merkley Dianne Feinstein and Bernie Sanders.

The letter was addressed to US Secretary of State Rex Tillerson and in it, the (mostly Democratic) senators stressed that while “significant” disagreements exist between the US – including both the allegations of collusion and election meddling, as well as Russia’s annexation of the Crimea – these differences shouldn’t prevent the two countries from engaging in diplomatic talks (of course, President Trump has already met Russian President Vladimir Putin in his official capacity as leader of the free world).

“Due to these policy rifts, not in spite of them… the United States should urgently engage with Russia to avoid miscalculation and reduce the likelihood of conflict.”

Their main recommendation? Lawmakers are concerned that some of the brand-new Russian nuclear weapons are not covered by the Strategic Arms Reduction Treaty, commonly known as the New START – and therefore, the US should consider pushing to broaden the treaty.

These weapons include a cruise missile with virtually no range limit and a nuclear-powered underwater drone.

Rumors had recently circulated that Tillerson would meet with Russian Foreign Minister Sergey Lavrov for bilateral talks while the two are in Africa, where Tillerson recently left for his first trip to the continent as Secretary of State. But both the State Department and Lavrov have denied these reports (which, as we learned with North Korea during the Olympics, doesn’t necessary preclude some backchanneling and jockeying to make the talks happen).

During his state of the union speech, Putin stressed that Russia would not have needed to develop these cutting-edge weapons had its legitimate concerns been heeded by the US and its allies.

“Nobody wanted to talk to us about the root of the problem. Nobody listened to us; so listen to us now,” Putin taunted.

Putin has repeatedly blamed the US for encroaching on Russia via its NATO anti-ballistic missile defense systems in Eastern Europe and holding military exercises. He also argues that former President George W Bush started down the road of hostilities when he withdrew from the anti-ballistic missile treaty.

Putin’s speech grabbed headlines across Western media, with many pundits clamoring about his decision to launch “a new arms race.”

But of course, President Trump has taken some steps to reestablish warm relations, including refusing to enforce a round of sanctions passed by lawmakers last summer.

Quite a flip-flop from The Left, who have countenanced Putin as Hitler and hawkishly demanded ‘action’ against Russia for months… did they finally get the joke?

via RSS http://ift.tt/2tu1yul Tyler Durden

While the headline payroll print of 313K was impressive, a look under the cover reveals even stronger data: first, the Household Survey showed that a whopping 785K jobs were added in February, while the number of unemployed Americans rose by only 22K, and with the labor force rising by 806K, this explains why the unemployment rate remained unchanged at 4.1%.

But what is even more notable is that when looking at the breakdown of job additions, one finds that in February, a near record 729K full-time jobs were added, the biggest monthly increase since last September’s 794K…

… while at the same time, an additional 277K part-time jobs were added to the economy.

What is curious is that while historically strong full-time months had been offset by weak part-time, and vice versa, February was an outlier, with both categories showing major gains. In fact, the combined gain of 1,006,000 full and part time jobs, was the biggest monthly gain this century.

As a result of this blockbuster monthly jobs number, expect a tweetstorm from Donald Trump any moment now.

via RSS http://ift.tt/2p5EVaa Tyler Durden

Amid all the talk of wage growth and surveys suggesting input and output prices are soaring, the market for ‘inflation expectations’ is suddenly flashing a recessionary red flag not seen since July 2008.

The last few months have seen short-term (5Y) inflation expectations in the breakevens market surge to their highest in 5 years; and while longer-dated inflation expectations have also risen, they have not kept pace with the short-end. A similar move was last seen in Q1/2 2008.

Simply put, markets are expecting an inflationary impulse in the short-term, but do not expect it to last as it will likely be swamped out by a recession as the economy is not grown fast enough to justify prices rising at that pace, and instead either profit margins will collapse or end demand shrivels as companies fail to pass through rising costs.

And, as a result, for the first time since July 2008, the inflation breakevens yield curve has inverted, with the market’s expectations for 30Y inflation now below that just 5 years ahead.

What is especially notable, is that the last time this happened, the US was already deep in recession (and we note that each time the 5Y has approached the 30Y, it has backed away – which given the sensitivity of stocks to breakevens could be problem going forward).

via RSS http://ift.tt/2FnHTll Tyler Durden