Our overall central bank theme remains the same. We believe every asset price, every data point and every economic statistic is working off of the easiest monetary policy in the history of time…and to the trillionth power. Because of this, we believe central banks can never roll back their nonsense. We simply believe they are boxed in like mixed nuts. Every time markets get in trouble, easy money is ramped up around the globe. Leave no doubt, this is the reason why despite teasing, yapping, telegraphing rate hikes, we have had only one in 22 months. That’s after having no rate hikes in many years.
WE BELIEVE THERE IS ZERO CHANCE RATES GET HIKED THIS COMING WEEK. We believe the fed is not independent thus they do not want to shake the trees. The last and only rate hike led to a worldwide 10% drop. That’s our take. Keep in mind, we do not know what is in these people’s brains as they contradict each other on a daily basis. Lastly, we are sickened that the man who ramped up all this maniacal nonsense, Ben Bernanke, was out this week calling for negative rates if necessary. Imagine…not getting paid to take on credit risk.
As far as markets, after 8 weeks of little index movement, volatility has shown up. The first move was to the downside as a few major indices broke support/50 day moving average. The area that has held best is the NASDAQ/NDX as the resurgence of Apple and everything in sympathy with Apple has helped tremendously.
But underneath the surface, we have seen tops in many areas in past weeks. Most all have followed to the downside. Fewer and fewer areas are working. Fewer and fewer names are in uptrends. More and more names have buckled. But most of the damage is of a shorter-term nature thus a good central bank reaction can turn the tide but only to a certain extent. Keep in mind, major indices are just a few percent below their highs.
Bearish areas include Reits, utilities, consumer staples like tobacco,food, beverages, household
products, cruise lines, hotels, a ton of retail, housing and housing related, a ton of healthcare, most commodities and many oils and now we are seeing a ton of industrial-type names rolling over.
One other note: watch financials. They have lost a little bit of relative strength here. If they break down badly…?
The good news is there remains a select group of big-cap tech,internet,semiconductors that holds up well. Remember, major indices are hardly down from their highs but some damage has been done. Also, we are heading into end of quarter soon. This takes us into Fed week. We freely say we have no clue how the market reacts to any of the nonsense that comes out of Yellen and the Fed.