The Hope Based Fakeout

Interest rate Blip

The interest rate blip is now firmly is place, and as we have outlined since we dumped our long held bond position on June 20 2019, we have expected a slow upward pressure on rates to the 2.3 % level on the 10 year bond. This is all based on HOPE, hope tied to the end of the China-US Tariff war.  See posts for 6/20/19; 7/15/19; 7/23/19 and numerous others along the way.

This Blip will be Short Lived

This interest rate bounce has a real basis tied to the fact that the FED has  tabled NEGATIVE RATES scenarios, they have not proved beneficial except for very short corrective measures, like March of 2009. So while rates are not going a lot lower, they at the same time do not have an economy that will push them much higher for long.

Real Economic Numbers will soon start to move front and Center

The latest GDP NOW forecast for the 4th Quarter is 1.0 % and we would expect that number to decline going forward and go negative in the First Quarter. This coming Friday, the GDPNOW number will have another update based on Retail Sales and Inventories, Industrial Production, Capacity Utilization, and Import/Export prices.

Is the New China Story that Great?

We like to watch the FXI China ETF for a sign of how things are outside the Financial headlines.  The past few days show a scary pattern much like the one on July 5th after which the China market took a big drop.