Issue: There is now $15 TRILLION of bonds around the world paying negative interest rates. That’s up from $12 Trillion just about 8 weeks ago.
Implication: There are several implications though one affecting U.S. investors is the pressure to lower interest rates; great if you need a loan, not so great for interest rates on bonds.
Issue: China tariffs on consumer goods delayed until December.
Implication: While it delays increasing prices on consumer goods it does nothing to reduce trade deal uncertainty, which markets don’t like (see next issue).
Issue: The S&P 500 swung at least 1% for 7 out of the last 9 days. Market volatility is increasing.
Implication: The market fears a recession. Volatility is likely the rest of the year. Looming issues like Brexit (looking more like a “no-deal” scenario) and unrest in Hong Kong don’t help.
Issue: The Treasury 2-Year bond was paying higher interest than the 10-year bond for a brief time this week. That’s a first since 2007 and is known as an “inverted yield curve”.
Implication: An inverted yield curve is often (not always) a sign that a recession is 12-18 months in the future.
Issue: Housing starts fell 4% in July but builders applied for more permits, a positive sign for the housing market.
Implication: Consumers are still spending money and the housing market is a big driver of economic expansion.
Issue: Greenland is not for sale.
Implication: You still need a passport to visit the world’s largest island.
Here’s to a profitable week!
Ron
