Mike’s Morning Brief – November 8, 2017

Mike's Morning Brief

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Market opens in the red again after President Trump had a very clear and emphatic speech last night from South Korea. He has been President exactly 1-year. The Stock Market has risen the most in any new President’s first year. He knows it too. President Trump left South Korea and landed in China for a meeting with President Xi. The critical Asian tour continues. Stocks saw their first decline in a number of days yesterday, though the DOW, meaningless as it is as a benchmark, squeaked out a slight gain. More importantly, the small-cap Russell 2K was down over 1% yesterday and has been weak the last couple of days. This suggests trouble around the tax-plan. The Tech heavy NAS was down too and is showing some signs of cracking. Earnings have been solid overall, but the companies that missed have seen their stocks clobbered. The broad-based rally has thinned quite a bit. Retailers are at multi-year lows, while the DOW, S&P, and NAS are at fresh new highs. Also, a concern is interest rates. They’re moving lower. It is happening on the back-end, specifically in the 30-year and 10-year Treasury yields. But they aren’t budging on the front-end, which means the yield curve is flattening. That’s not a good sign. Financials are feeling some pain. The yield curve inverts when a recession is on the horizon. There’s no such evidence of recession anywhere now, but it’s worth paying attention to. The Bond Market is the smartest money there is. Democrats scored some victories last night, with important wins in Virginia and New Jersey. Oil prices have seen a big move higher of late. It’s driven by increased demand overseas while supplies continue to shrink. The corruption scandal in Saudi Arabia is playing a role too. WTI hit $57 this week, the highest level in 2.5 years. That is an important development. Energy stocks have had a big run of late after getting crushed earlier in the year. Gold prices are higher in early trading, suggesting caution too. We expect the zero volatility to pick up quite a bit. Call buying on the VIX has picked up this week, something we haven’t seen in a while. November and December are normally the strongest 2 months of the year for stocks. But 2017 has been anything but normal.

Have a great morning,

Mike Frazier

Mike’s Morning Brief – November 1, 2017

Mike's Morning Brief

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Market opens higher again, despite a tragic terror attack in New York City.  These are becoming far too common.  The Market seems to have developed an immunity to such things now.   It’s the world we live in.  What’s worse, it’s becoming political as the President and the Senate Minority Leader (both New Yorkers) are attacking each other on Twitter.  Expectations for a roadmap on taxes has been pushed to tomorrow. Congress is having trouble getting the votes.  Tax cuts are critical to this rally.  The Fed concludes its 2-day meeting today, which could be one of the last for Janet Yellen as head of the Fed.  October was another positive month for stocks.  In fact, it was the best month since February.  When both September and October are higher, Q4 has ended positively over 80% of the time.  The DOW and S&P have been up in 7 consecutive months.  The S&P was up 2% in October while the DOW jumped 4%.  It has been a DOW driven rally this Fall, and the DOW saw the biggest monthly spread over the S&P since 2008.  This is a Bull Market.  Earnings Season continues.  Over 60% of S&P components have reported.  75% of them have beaten expectations.  Facebook, Symantec and Tesla report earnings after the close.  They will be Market moving.  Facebook had a particularly tough day on Capitol Hill regarding Russian involvement.  Crude oil continues to move higher as the global economy expands.  Energy stocks are having a good run and are sleepers for a catch-up play as they are under-owned and widely hated.  Interest rates are still not moving higher, suggesting there are some lingering issues that could derail this rally.  The Bond Market is the smartest money.  We pay close attention.  Buckle up and hang on for the ride.

Have a great morning,

Mike Frazier

Mike’s Morning Brief – October 18, 2017

Mike's Morning Brief

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Market opens in the green again, punching thru DOW 23K for the first time yesterday. IBM is leading the charge this morning as Big Blue reported a better than expected Qtr suggesting a turnaround is in place. IBM accounts for 84 of the 111 points on the DOW in early trading. Interestingly, the Tech-heavy NAS is in the red at the open. China began its formal leadership transition today. The grand plan is a “modern socialist country that is open to the world”. The word “open” is an interesting one here.  The White House continues to refer to China as a currency manipulator. Trump’s team continues to market the tax plan but seem to be conceding that it won’t happen this year. Our feeling is the Market anticipates a tax deal early next year, not in 2017. NAFTA discussions will continue in 2018, as US, Canadian and Mexican leaders are far away from a deal. Earnings Season continues with a very positive tone. Crude prices are remaining elevated with WTI at $52. Interest rates are creeping higher too, with the 10-year Treasury yield at 2.3%. But for now, it’s all about stocks and a rally that just doesn’t want to rest, despite so many external issues and cross-currents to slow it down. No breather yet. It’s not normal. Then again, nothing about 2017 has been normal…

Have a great morning,

Mike Frazier

Mike’s Morning Brief – October 11, 2017

Mike's Morning Brief

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Mike’s Morning Brief: Market opens flattish with the major indexes at fresh, all-time highs reached again yesterday. Morgan Stanley is out with a cautious call suggesting recent Market behavior does not reflect the fundamental landscape. Stocks have been up pretty much every day for weeks. There have been 47 record closes. Growth is not that strong. The Japanese Nikkei reached levels not seen since 1996. It remains a long way from its all-time high reached in 1989. The Catalan leader diffused some of the tension in Spain, proposing talks with Madrid about separation. President Trump declared a state of emergency in Northern California with the devastating fires, which have yet to be contained. There have been more major natural disasters in 2017 than I can remember. Earnings Season should dominate trading, starting tomorrow, and stocks are pricing in a lot already. Stay tuned.

Have a great morning,

Mike Frazier

Mike’s Morning Brief – October 4, 2017

Mike's Morning Brief

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Market opens flat with all 4 major US indices closing yesterday at fresh, new highs.  The S&P has been up 6 straight days. Small Caps have been strong of late after a period of weakness over the summer. What’s leading? What’s following?  Financials for sure have taken charge. Energy is taking a breather after a monster move. Transports have been strong of late, and the Airlines soared yesterday. Tech and HC have gone sideways the last few weeks but remain the top 2 sectors on the year. The rally has broadened out.  That’s a good thing. But it feels like it’s on fumes. It’s not normal and healthy for this upward trajectory not to have some back and filling.  There are plenty of things out there that can derail this rally.  Puerto Rico bonds are taking a hit after President Trump suggested the territory’s heavy debt needs to be wiped clean, and don’t have the cash, which is confusing many. The President heads to Las Vegas today. There is a rumor circulating that Amazon might buy Nordstrom. The European Commission is pressing Ireland on money not being collected from Apple. There is a growing chance that Spain actually sees a split. Fed Chair Janet Yellen has a speaking engagement today, which always draws attention. But now that there are 2 candidates that seem to be rising in the ranks of getting her job in February, investors will be paying more attention. The US economy strengthened last Qtr, printing a 3.1% increase.  Friday’s job report combined with the beginning of Earnings Season will tell us a lot about where we’re headed. Pepsi missed expectations and the stock is feeling some pain.  Interest rates are slightly lower in early trading. Both Gold and Oil are catching a bid this morning. WTI is still holding that key $50 level. September usually sees declines and October sees increased volatility. So far there’s been next to none. This Bull just doesn’t want to go down. But for how much longer? Stay tuned…

Have a great morning,

Mike Frazier

Mike’s Morning Brief – September 27, 2017

Mike's Morning Brief

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Market opens in the green with just 3 trading days left in Q3. The S&P is back above 2500. Price action has been active but conviction has not. Buying the dip has been the theme for years and the same attempt has been in place in this recent stall. So far there has not been a 5% sell-off in 15 months. That’s a long time and not healthy. We think that changes, but most likely after the Qtr ends. Last minute window dressing will likely keep stocks elevated to October. But the news is not great around the world. Sharp words keep firing back and forth between the White House and North Korea, although the tone is apparently much different behind the scenes. The Republicans pulled the last-ditch attempt at a Health Care plan yesterday. They didn’t have the votes. Tax reform is next, but Republican leadership is very much in question as they have not been able to accomplish much of anything since taking power. And it probably will not consist of reform and more like cuts. Regardless, the Market has always liked the prospects for tax changes. The results last night in Alabama are another tell for the Republican Party. President Trump campaigned for a candidate that lost by a wide margin to an extreme right candidate backed by former Trump strategist Steve Bannon. The damage in Puerto Rico keeps mounting in the wake of Hurricane Maria, with over 40% of the population still without drinking water. The President announced he will visit the US territory sometime next week. Crude prices have been strong of late, sending Energy stocks running higher at the end of the Qtr. Rising rates this morning are sending Financials upward as well. Both have been laggards in 2017. This is a very positive development that could bring a more broad-based strength to the overall Market while Tech and Health Care take a breather. We still think October brings more volatile price action and the Correction is not yet over.

Have a great morning,

Mike Frazier

Mike’s Morning Brief – September 20, 2017

Mike's Morning Brief

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Market opened flattish again this morning ahead of the Fed policy statement and press conference. President Trump addressed the United Nations General Assembly yesterday with a very bold speech. Some people liked it. Some didn’t. He was very critical of North Korea’s leader. He set expectations for military action along the Korean Peninsula. A response is very likely. Hurricane Maria made landfall over Puerto Rico with category 4 winds. It is next expected to hit Florida. A horrific earthquake near Mexico City killed over 200 people. That is the 2nd earthquake in 2 weeks in Mexico. Mother Nature has been active and angry of late. Crude is back above $40. With all of these things going on and a Market that has become rather expensive, you’d think we’d be in the midst of a pretty healthy sell-off, right? Nope. All 3 major indexes are at all-time highs. The DOW made it 8 up days in a row and 16 of the last 21. Like a beach ball under water, this Market just won’t stay down. The VIX can’t stay up. Interest rates are ticking lower in early trading. The yield curve has flattened a bit. We will learn more at 11a.

Have a great morning,

Mike Frazier

Mike’s Morning Brief – August 30, 2017

Mike's Morning Brief

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Market opens flattish after a surprising reversal yesterday which saw the North Korean induced overnight losses completely erased.  We expected to see a raucous August.  It sure has happened.  This Market has held in remarkably well considering all of the issues going on, but we aren’t convinced it will last.  The risks are becoming greater by the day in our estimation.  The latest missile launched from North Korea is quite concerning on so many levels.  It comes at a time when our nation has the appearance of vulnerability to our adversaries.  We aren’t convinced the correction is over.  This feels like new territory in which we operate, and the DOW and S&P are merely 2% off all-time highs.  The tragedy along the Gulf Coast in Texas will take time and require substantial resources in recovery.  While leaders in Washington argue, first responders and fellow Americans rushed to help their neighbors.  That is indeed the American way.  Hopefully, this will instill patriotism and collaboration in Washington to provide ample aid to southeast Texas and keep the government open.  The US is on course to hit the debt ceiling next month, which means it could default in paying its bills and obligations.  There was a government shutdown 4 years ago.  It could happen again. The revised GDP report shows the US economy grew 3% last Qtr.  That’s very solid.  It also means the Fed just might raise rates again before year’s end.  Crude prices continue to slip with refinery outage along the Gulf Coast as Permian supplies have nowhere to go.  Gas prices are at 2 year highs.  Gold spiked early yesterday but reversed course as stocks rallied.  There is a bit of an inverse correlation between equities and the precious metal again, something important to pay attention to.  The President heads to Missouri today with tax-reform on the agenda.  No doubt, the topic of North Korea is trailing.  Keep those belts buckled.

Have a great morning,

Mike Frazier

Mike’s Morning Brief – August 23, 2017

Mike's Morning Brief

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Market opens lower, giving back some of the gains from yesterday, which was the strongest day for stocks in 4 months. The NAS avoided a 4-day slide, something that had not happened this year.   Just 1 day after giving a speech on Afghanistan, which got pretty solid reviews, President Trump became unhinged again last night in Phoenix.  He pretty much confused the conciliatory words that he said about Charlottesville again, trashed the media as usual, he even slammed John McCain (in his home state) and said that a government shutdown might actually happen and the wall will be built. People that love Trump liked it.  Those that don’t, didn’t.  It’s also being reported that Trump and Senate Majority Leader are in the midst of their own Cold War, which raises the questions of whether taxes will actually get treatment. This adds more confusion to the equation because McConnell and House Speaker Paul Ryan have reportedly been busy working closely with Treasury Secretary Steve Mnuchin and the President’s chief economic advisor Gary Cohn on putting together a tax plan that could pass.  It was hopes of tax-reform that triggered yesterday’s rally.  Today it’s being reversed.  The circus continues. Wal-Mart and Google are teaming up to compete with Amazon’s Alexa. Samsung is releasing its new Galaxy 8 phone in NYC, weeks ahead of the next iPhone.  Competition is fierce in the phone business.  Global Markets were mixed overnight, with gains in Asia and losses in Europe.  Both the Dollar and Oil are giving up some of yesterday’s gains too while Gold is catching a bid.  Interest rates are lower with the 10-Year Treasury yield back below 2.2%.  Keep those belts buckled.  It¹s going to be a bumpy ride.

Have a great morning,

Mike Frazier

Mike’s Morning Brief – August 16, 2017

Mike's Morning Brief

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Mike’s Morning Brief: A fast-break rundown of what’s going on.

Market opened in the green as the whipsaw action continues on Wall Street. DOW is back over 22K. Volume has been on the light side, typical for this time of year. Earnings Season is coming to an end, and the results have been quite solid, which should keep a floor under this Market. European GDP grew 2.2%, providing strength for the global economy. NAFTA talks begin Round 1 today. The 1990’s trade agreement got a lot of publicity during the election and the President didn’t like it. Speaking of the President, he had a press conference yesterday that created a firestorm of criticism and the divide in this country has not been this wide in decades. More CEO’s are leaving his council. Geopolitics continue to be a major issue. With North Korea, Russia and Venezuela, many around the world would say the US has become the biggest geopolitical risk. Think about that for a minute. The Fed releases its July meeting minutes today. The US economy is in solid shape. Another rate hike might or might not occur by year’s end. The Market is pricing in just a 47% chance. Interest rates keep ticking up with the 10-Year Treasury yield at 2.27%. Oil prices are higher in early trading, with WTI holding $47 but can’t seem to get thru $50. Gold is lower after a strong move last week. Stocks are going through another grinding period. Last week’s shakeout has yet to be resolved. This is the most bizarre political environment I’ve seen, perhaps ever. We are prepared for more downside price action. Keep those belts buckled. There is more turbulence ahead.

Have a great morning,

Mike Frazier

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