The Market Bull – April 15, 2019
The major averages finish with small losses to begin the week on little real news. The first quarter earnings season begins with a decent start.
The April New York Manufacturing index gained 6.4 points to 10.1 on strength in new orders and inventories. Employment was mixed, price data slipped again.
Despite some fairly low expectations the first quarter earnings reporting season got off to a decent start. Of the 30 companies to report so far 73% have beaten earnings, a figure 10% higher than last year. 47% have beaten sales so far, while 37% have beaten both the earnings and sales numbers. That said even the most bullish analysts expect earnings to decline again in the first quarter, which would make three strait quarterly earnings declines. Some analysts figure that earnings will decline all year.
It’s generally accepted that the function of Central Banks is to manage monetary and fiscal policy so as to ensure stable employment, minimal inflation, and steady economic growth. In the modern era many Central Banks also got into the business of intervening in financial markets through the purchase of securities. With the central banks of Japan, and Switzerland openly acknowledging that they intervene. The Federal Reserve certainly did intervene as well during the last crisis when it bought over a trillion dollars of Mortgage Backed Securities or MBS when it arrested the housing crisis. President Donald Trump has been making the rounds of late calling for blatant Central Bank intervention, requesting another round of QE or quantitative easing, whilst making grandiose claims about the financial markets and economic growth. One school of thought figures that this is a recipe for an inflationary bust followed by a currency crisis and economic collapse. There is some history for this, Germany’s Weimar Republic, and Zimbabwe come to mind, but at the same time Japan has proven all of its critics wrong as it has intervened heavily in both its stock and bond markets so far with no ill affect. Still various Central Bank heads make the rounds talking about the evils of political influence and a loss of Central Bank independence, the latest being European Central Bank head Mario Draghi. Which gets us to the heart of the whole MMT or Modern Monetary Theory debate as one side says debt doesn’t matter and you can simply print the money you need and intervene at will. The other more traditional or old-fashioned side says nonsense as unchecked money printing leads to inflation, currency crisis and economic collapse. Reckless money printing and credit creation has so far blown repeated economically destabilizing asset price bubbles in the modern era ala the Great Financial Crisis of 2007-2009, but so far, no economic collapse. That said with another credit driven asset bubble about to burst and the world’s Central Banks out of ammunition with respect to interest rates. We all best hope it’s different this time as the banksters have painted themselves into a corner.
Standard and Poors 500 Index closed at: 2,905.58 down 1.83
NASDAQ finished the day: 7,976.01 down 8.15
Gold ended trading at: $1,290.90 down $.40