The Closer — Yields On The Verge, Housing Surge, GDP Window, ICI Flow — 2/27/19
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Looking for deeper insight on markets? In tonight’s Closer sent to Bespoke Institutional clients, we take a look at the breakout in breadth visible from outperformance of the S&P 500 on an equal-weight basis relative to the S&P 500 at its typical market cap weighting. The chart below illustrates that breakout. We also discuss the price action in yields which suggest the next large move for rates will be higher. In economic data, we take a look at more housing activity green shoots in the form of today’s mortgage purchase applications and pending home sales data. We then move on to reviewing the outlook for trade and inventories in tomorrow’s GDP numbers and finish with an update on ICI’s mutual fund flows data.
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February: The Month Of The 200-DMA
As the month comes to a close, from a technical perspective, global equity indices have made solid progress in February. Around half (12) of the 23 country equity index ETFs that we track in our Global Macro Dashboard managed to take out their respective 200-DMAs this month. These country indices broadly bottomed around the same time last year and have been steadily climbing since with some surpassing the 200-DMA more than others. For example, Italy’s FTSE MIB and France’s CAC 40 have just barely moved above while China’s CSI 300’s has surged past. Meanwhile, Spain’s IBEX may not have necessarily started the month below, but it has seen constructive movement during, bouncing off of its 200-DMA. Global indices taking out these resistance levels—or for the case of Spain finding it as support—helps to provide some reassurance to the strength of the rally around the globe so far in 2019.
Whereas for the better portion of 2018 some of these indices remained in downtrends, the current rally is a nice reversal. Granted, equity market performance certainly does not entirely negate the concerns around weaker macroeconomic data from a number of these countries, some of which can be seen in our Global Macro Dashboard, but it does help give a reason to not head for the exits as a result of global slowing just yet.
Chart of the Day: Tech Hardware, Led By Apple, Looks Positive
Fixed Income Weekly – 2/27/19
Searching for ways to better understand the fixed income space or looking for actionable ideals in this asset class? Bespoke’s Fixed Income Weekly provides an update on rates and credit every Wednesday. We start off with a fresh piece of analysis driven by what’s in the headlines or driving the market in a given week. We then provide charts of how US Treasury futures and rates are trading, before moving on to a summary of recent fixed income ETF performance, short-term interest rates including money market funds, and a trade idea. We summarize changes and recent developments for a variety of yield curves (UST, bund, Eurodollar, US breakeven inflation and Bespoke’s Global Yield Curve) before finishing with a review of recent UST yield curve changes, spread changes for major credit products and international bonds, and 1 year return profiles for a cross section of the fixed income world.
In this week’s report we review market pricing for global central bank action over the next few years.
Our Fixed Income Weekly helps investors stay on top of fixed income markets and gain new perspective on the developments in interest rates. You can sign up for a Bespoke research trial below to see this week’s report and everything else Bespoke publishes free for the next two weeks!
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Bespoke’s Global Macro Dashboard — 2/27/19
Bespoke’s Global Macro Dashboard is a high-level summary of 22 major economies from around the world. For each country, we provide charts of local equity market prices, relative performance versus global equities, price to earnings ratios, dividend yields, economic growth, unemployment, retail sales and industrial production growth, inflation, money supply, spot FX performance versus the dollar, policy rate, and ten year local government bond yield interest rates. The report is intended as a tool for both reference and idea generation. It’s clients’ first stop for basic background info on how a given economy is performing, and what issues are driving the narrative for that economy. The dashboard helps you get up to speed on and keep track of the basics for the most important economies around the world, informing starting points for further research and risk management. It’s published weekly every Wednesday at the Bespoke Institutional membership level.
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Morning Lineup – Decisions, Decisions, Decisions
Just like the opening days of the NCAA basketball tournament, today is the kind of day when it pays to have more than one TV or at the very least, a DVR. With President Trump meeting Kim Jong Un, Fed Chair Powell set to resume testimony on Capitol Hill, and former Trump lawyer Michael Cohen also set to testify, who needs Netflix? Not only that, but there’s also a healthy slug of economic data to digest.
Stocks are poised to open lower but since declines early in the European session, S&P 500 futures have edged a bit higher and are currently pointing to a decline of just about 30 bps at the open. The dollar is down for the fourth day in a row and 8th of the last 10 days. Read all about overnight events and this morning’s news in today’s Morning Lineup.
Bespoke Morning Lineup – 2/27/19
Software had been a leading area of the market leading up to the September highs, and the sector pulled back just as much as the broader market during the Q4 sell-off. The rally back, though, has been much stronger. Just yesterday, the group traded within two points of its all-time high from 2018. This particular group isn’t the same as the Software and Services group, which contains many of the highest fliers in the sector, but instead, it is made up of the major players in the space including Microsoft (MSFT), Oracle (ORCL), Adobe (ADBE), Salesforce (CRM), etc. Nevertheless, if this group is trading back at new highs, it bodes well for the overall growth trade and broader market in general.
Meanwhile, semis continue to hold up as well. While not as strong as the software group, it continues to outperform as it attempts to remain above its downtrend from the highs in the first half of 2018.
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The Closer — Resistance Ramp, Powell In The Senate, 5 Fed, Housing Confidence — 2/26/19
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Looking for deeper insight on markets? In tonight’s Closer sent to Bespoke Institutional clients, today’s price action gave some support to our observation yesterday that equities were running out of steam, we provide an updated look at the technicals of the S&P 500 before recapping Fed Chair Powell’s first day of testimonies on Capitol Hill. Turing to what was a busy day in economic data, we take a look at our Five Fed Manufacturing Index with the addition of the Richmond and Dallas Feds’ inputs, what the Conference Board’s data is predicting for the unemployment rate, and finally, the awful print of housing construction data released today.
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