Good luck trying to get ahead of all the data and events this week. Our focus will be to react to any outsized moves resulting from; (1) U.S. China trade negotiations, (2) Brexit drama, (3) Hong Kong protests, (4) the minutes from the last FOMC meeting, (5) economic data focused on inflation, and (6) Impeachment rhetoric. Think about how many of these macro issues can impact the market! Rather than trying to figure out a move ahead of them, we would rather fall back on our positive core fundamental thesis driven by credit and stand ready to take advantage of any weakness that might come with an unexpected news item or tweet.
The most curious thing to me is the constant hunt for a recession that we already know is in place for manufacturing similar to the two prior instances associated with the European Debt Crisis in 2011-12 and Emerging Market Commodity Crisis in 2015-16. In each of these, the cyclical sectors underperform and U.S. Treasury yields collapse anticipating the messaging from global growth, but the consumers got an adrenaline shot from the lower rates and solid employment backdrop. That appears to be the case again in the current situation. Financial institutions continue to lend and we remain in a full-employment economy, which translates to a slowdown vs. recession. If this is right offense should be on the field, even if it doesn’t “feel” right.
All expectations and data points are sourced from Bloomberg as of 10/07/19 unless noted otherwise.
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