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Lower Rates
The Market Bull 2019

 
 
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The Market Bull – June 5, 2019

Despite mixed data the major averages built on yesterday’s giant advance closing with modest gains after Treasury secretary Powell promised lower rates.

Federal Reserve Chairman Jerome Powell demonstrated his resolve to support the markets with unconventional monetary policies, largely quantitative easing and negative interest rates if necessary. Based on statements made at the Conference on Monetary Policy Strategy, Tools, and Communications Practices. While it is certainly possible to solve the problems caused by too much debt with even more debt, we have spent the last 10-odd years proving this. The solution requires ever larger amounts of debt or it will fail spectacularly. Every time the Fed has moved the punch bowl the markets have wobbled badly, this time is no exception. One day the piper will have to be paid, and the price is going to prove very, very steep.

Moody’s Beige Book Index plunged 13.9 points in April as the series loses nearly half its value in just the last 4-months reaching a nearly 3-year low. Activity was particularly weak in Kansas City, Saint Louis, and New York. At the other end of the scale San Francisco, Atlanta and Dallas are booming.

Productivity handily beat expectations in the first quarter with a 3.6% gain, a 4th consecutive solid advance, and the largest increase in 5-years. Unit labor costs fell .9% a second decline in the last 4 quarters. A solid figure to be sure but productivity remains historically weak with 5-year average of just 1.3% largely because of an ageing workforce. Additionally the 1st quarter figure is likely skewed by the partial government shutdown.

The International Trade Balance increased to 50 billion in March. Exports advanced to 212 billion while imports increased to 262 billion. At least by this measure tariffs aren’t having any material effect. That said Chinese tariffs will jump from 10% to 25% on Friday and will be broadened to include almost all Chinese imports.

The Quarterly Services Survey while still showing solid growth, continued to weaken in the 1st quarter, with the exception of hospitals. On a year ago basis services revenues increased 5.6%. Solid gains were reported by Software Publishers, Attorneys and Hospitals.

Standard and Poors 500 Index closed at: 2,826.15 up 22.88
NASDAQ finished the day: 7,575.48 up 48.36
Gold ended trading at: $1,334.70 up $6.00

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