The latest ISM Manufacturing Index came out earlier today. The numbers were strong, and the 69.1% reading was above expectations.
Everyone is bond bearish these days. Alan Greenspan is because he expects inflation. But this will mean tightening that risks derailing the US economy in 2019 and beyond.
The state of the nation is as good as it is going to get during this business cycle — at least from an economic perspective. On that, we should be a lot more interested in what Janet Yellen has to say in her last FOMC press conference.
The position I have stressed is one that is counter to the bond bear market narrative. But, that is longer-term. Shorter-term dynamics are bond bearish.
With Donald Trump set to give his State of the Union address, Democrats and Independents have gone from positive in 2017 to negative in 2018, while Republicans have gone in the other direction.
Jeremy Grantham discussed his recent US market commentary with Consuelo Mack. The essence of Grantham’s comments were bearish for the US, suggesting investors could expect only a couple of percent real return over the next couple of decades in US equities. He suggests rotating into Emerging Markets.
Gallup has done a deeper dive into the data in its latest poll, which I highlighted last night. The numbers show small businesses content with the state of the economy, giving the Trump Administration high marks in this area.
Small business optimism is at a 10-year high on the eve of the latest US GDP report – another bullish indicator. Inflation is the key to how this impacts bonds longer-term.
“Basically, with the Fed and the other central banks flooding the world with money, a rising tide lifts all boats.” So it’s the tightening we have to fear.
What will stop the dollar’s sell-off is not officials. It is not the likelihood of a Fed hike. Rather the market will exhaust itself.
Bridgewater Associates’ Ray Dalio warned that a rise in bond yields could lead to the biggest crisis in fixed income markets in almost 40 years.
Probably not. As Mnuchin and President Trump have done before, a distinction was drawn between short- and longer-term perspectives.