As readers of the missives know, the three sectors we have really liked are Financials, Technology, and Industrials. Therefore, we were excited to arrive in Boston last week to see portfolio manager (PMs) and renew friendships.
Recent stock market volatility was partly blamed on fear that inflation will soon “take off.” Simple supply and demand arguments would suggest that pressure on resource markets (labor mostly, but also raw materials) would lead inflation higher.
So most know we took one of our South Florida speaking tours last week. Such tours consist of meeting with portfolio managers, presentations to clients of Raymond James, branch visits with our financial advisors, doing the media thing, well you get the idea.
The recent uptick in average hourly earnings (+2.9% y/y) and the surge in the government’s borrowing needs ($1 trillion plus in the current fiscal year) have had some implications for the underlying fundamentals. However, the outlook hasn’t been tumultuous enough to explain multi-100-point intraday swings in the Dow. Something else is clearly going on.
Last week, Treasury announced that it expects to borrow $617 billion in the first half of 2018, vs. $75 billion in the first two quarters of 2017, and announced increases in the sizes of its regular monthly auctions of notes and bonds. It should then be no surprise why bond yields are rising.
We have long been big fans of the books about Sherlock Holmes ever since our misbegotten youth. Strangely enough, being a strategist/analyst is much like being a detective. One has to gather the evidence, pour through it, decipher it, eliminate the “noise,” and come to a conclusion that tips the odds of making money in our favor.
A strong economy, a booming stock market, and tighter monetary policy are all dollar positive. So why is the dollar down more than 12% since the start of 2017?
“You’ve Got Mail” is a 1998 romantic comedy-drama starring Meg Ryan and Tom Hanks. The film is about two people involved in an online romance who are unaware that they are also business rivals. In this morning missive, however, we are not referring to the movie, but rather some recent emails we have received.
The year was 1963, the singer was Lesley Gore, and the song was “It’s My Party.” Clearly, that song seems appropriate given the government shutdown over the weekend. Indeed, “It’s My Party” and the blame rests with both parties in the political equation.
The economic impact of the partial government shutdown will depend on how long it lasts. Government workers will still get paid, but those supporting government workers (food service, etc.) will not. Economic data reports and Treasury auctions may be delayed.