That’s all you got?

That’s all you got?  Stocks slid moderately as the war of words kept Middle East tensions front and center.  Investors had lingering worries about a conflict with Iran… not so much.

 

N O T E W O R T H Y

 

• Don’t mess with me.  Prior to yesterday’s open stocks were in the green as investors were willing to just move on from a potential crisis in the gulf, but the blind optimism just couldn’t last.  Saber rattling between the US and Iran put a damper on any rally causing stocks to sell off.  Looking more closely at yesterday’s market action reveals that the selloff was not a panicked one.  Crude oil, which had climbed in the prior 3 sessions actually gave up some of its gains yesterday, trading off by -0.9%.  The VIX index, also know as the fear index as it is derived from index option volatility, typically spikes during times of strife and it traded down in yesterday’s session to close at 13.79, well below 20 which is considered by many to be the real fear zone.  So it would appear that investors are not too concerned with whatever may come of the potential conflict.  Further, WHILE YOU SLEPT, Iran launched missile attacks on US military bases in the region in a counterstrike.  Markets initially responded in a sharp selloff with Dow Jones futures trading down by around 380 points.  Trump tweeted that “all is well” and traders thanked him by buying the dip.  Iran released a statement that it did not want a war which led traders to conclude that the missile strike was a face-saving response with no further escalation and the steep losses were essentially erased by this morning. Markets start the day with cautious optimism.
• It’s only politics.  I hate to do this but I feel the need to get it out there.  We are in an election year!  Wrangling between political parties dominates most non-financial news stations but that only has minimal impact on the markets.  Similarly, Trump’s impeachment was more a side note to last years stock rally.  But this year the US will hold presidential and congressional elections, which means the winners WILL have an impact on the markets.  Though it is still too early to tell what might happen or even predict who might win, it is important to begin to take a closer look at the policies of party front runners.  I know that is not so easy right now, but in the weeks ahead as Democratic primaries begin we will start to get a clearer picture of who might be on the ballot in November giving us some more tangible information to forecast on.  In the wake of last years rally, stocks could be vulnerable to significant volatility as unknowns begin to pile up.  Like it or not, now is the time to start focusing on the nation’s capital.

 

THE MARKETS

 

Stocks slipped yesterday as unease around the US conflict with Iran remained.  The S&P500 traded off by -0.28%, the Dow Jones Industrial Average dropped by -0.42%, the Russel 2000 gave up -0.3%, and the NASDAQ Composite Index fell by -0.03%. Bonds traded off and 10-year treasury yields climbed by +1 basis point to 1.81%.  Gold continued its ascent, trading up by +0.55%.

 

NXT UP

 

– ADP Employment Change is expected to show that 160k new jobs were created last month compared to 67k in the prior month.

– Fed Governor Lael Brainard will speak today.

– The Treasury will auction off $24 billion 10-year notes today.

– This morning Lennar beat while Walgreens missed estimates and we will hear from Constellation Brands before the opening bell. After the close we will hear from Bed Bath & Beyond.

 

See you in Florida

 

Last call!  I will be meeting with clients in our South Florida locations tomorrow and Friday and I would love to chat with you. Reach out to set up some time.

 

daily chartbook 2020-01-08