Missing the Point

Microsoft, Netflix, United Health earnings and Tesla corporate news provided investors with some positive and actionable trading themes last week that ultimately delivered some lift to an otherwise trendless US equity landscape. Technically, the market outlook remains “uptrend under pressure” despite the fact that the S&P 500 gained 0.38% last week while the Nasdaq Composite registered a weekly gain of 0.79%.

The Nasdaq’s outperformance was clearly driven by earnings and corporate news. On the week, Netflix rose a staggering 26% on the back of better than expected Q3 results, gains in subscribers both domestically and internationally and constructive guidance. Microsoft also gave markets some lift by solidly beating top and bottom line consensus expectations. United Health beat and raised yearly guidance as well, rallying 8% on the week. We also received encouraging results from McDonald’s and General Electric. This week we have earnings scheduled for release by mega-caps Apple, Amazon, Alphabet, Caterpillar and Exxon Mobil.

As encouraging as the highlighted corporate results outlined above were last week, the economic data we received was less compellingly positive. The Consumer Price Index for September, released last Tuesday, came in at 0.3% – meeting consensus. Less food and energy it was 2.2% on a year-over-year basis. The Housing Market Index for October was 63, hitting consensus on the nose. Housing Starts and overall building activity dropped to an 18-month low in the period. For September, starts – level – SAAR slipped to 1.047M from August’s revised 1.150M. However, permits gained well above expectations for the period. For September permits – level – SAAR was 1.225M versus consensus calling for 1.165M. The Atlanta Fed’s Business Inflation Expectations for October were 1.7%.

The EIA Petroleum Status Report for the week ending October 14th, reflected a market moving draw of 5.2 m barrels. Distillates also slipped again by 1.2 M barrels. The Fed’s Beige Book confirmed for investors that the current rate of economic expansion remains both modest and soft. There was no mention of wage pressure despite characterizing current labor conditions as “tight.” Weekly Jobless Claims came in at 260k – more or less in line with 250k. Existing Home Sales – level – SAAR were a bright spot last week coming in at 5.470M. Year-over-year, 0.6%. Finally, the Leading indicators component of the economic calendar for September came in at 0.2%; once again hitting consensus.

This week’s economic calendar, outlined below, is likely to play second fiddle to the earnings calendar. That said it will provide the template for any further conjecture on the Fed’s intention with monetary policy through year-end. There are a few highlights. Things get rolling with this morning’s release of the Chicago Fed National Activity Index. The street is expecting below trend growth in the range of -0.55 level. The three-month average is -0.07. The PMI Manufacturing Index Flash for October Is expected to register at 51.2. Tuesday we receive the FHFA House Price Index. The street expects a monthly tick higher of 0.5%, matching last month. On a year-over-year basis, it is expected to reflect a gain of 5.8%. The Conference Board’s Consumer Confidence reading is supposed to come in at 101 versus last month’s 104.1. New home Sales – level – SAAR on Wednesday are expected to reflect a gain of 601k. Durable Goods for September are expected to be nearly flat at 0.2%. On Friday we receive GDP ( 2.5% consensus) and the Employment Cost Index ( 0.6% consensus).

Missing the point behind the US Election from a global perspective

As the US elections come down to the wire, there is a palpable sense of dread and panic in the air – no matter who you are voting for. Hillary Clinton voters cringe with every WikiLeaks release. Donald Trump voters cringe every time he says anything that could be used against him. Whether you follow the elections on MSNBC, ABC, Drudge, Breitbart, The Intercept, CNN, Fox News or any other media outlet, I would suggest something bigger is at play in elections – globally. It almost seems to me as though there has been a collective emergence of discomfort on the part of global citizens as we all look around the corner. From British voters that elected to leave the EU in dramatic nationalist fashion to an undeniable massive rise in populism across both Eastern and Western Europe. From France to Hungary. From Belgium to Italy. There is a collective political movement afoot that has the potential of upending the aspirations of generations of globalists everywhere.

Whoever wins the US elections this cycle she or he will have to deal with a new reality in the US and Western political landscape. That reality has to do with national control over borders, taxes, and accountability. Sovereignty. Here in the United States, Donald Trump is an imperfect reflection of that collective passion. He is viewed as being the change agent when it comes to this narrative. Hillary Clinton proudly promotes an ideology and vision that leans heavily on her husband’s accomplishments, President Obama’s eight years in office and her track record. In a world that is rapidly evolving away from the established new world status quo, even if she wins the White House, the battle lines are just being drawn – globally. The sledding for those looking to engineer a frictionless, borderless, progressive agenda is about to run into a buzz saw of resistance from who Nigel Farage calls “the little people.”

I have touched on these themes over the past several months, and increasingly my assessment of the evolving landscape is being validated. In this weekend’s Bloomberg Businessweek, Carol Matlack wrote an interesting article on the subject. The piece begins with the following introductory paragraph:

“As Europeans assess the fallout from the U.K.’s Brexit referendum, they face a series of elections that could equally shake the political establishment. In the coming 12 months, four of Europe’s five largest economies have votes that will almost certainly mean serious gains for right-wing populists and nationalists. Once seen as fringe groups, France’s National Front, Italy’s Five Star Movement, and the Freedom Party in the Netherlands have attracted legions of followers by tapping discontent over immigration, terrorism, and feeble economic performance. “The Netherlands should again become a country of and for the Dutch people,” says Evert Davelaar, a Freedom Party backer who says immigrants don’t share “Western and Christian values.”

Flickr photo: “G” jewels g is for grandma