This big Wall Street bear warns his bleak scenario for 2019 is taking shape
Why are stocks busting out all of a sudden?
Last week, tariffs on Mexico increased the chances that the Fed would cut rates. Investors obviously like that. So, stocks rallied. This week, Trump backs off those same tariffs. Investors apparently like that, too. Stocks again are rallying.
Josh Brown of Ritholtz Wealth Management, please explain.
“The market wanted to go up. I don’t think it mattered what happened. We just use these things as a reason after the fact to look smart,” the CEO of the New York City-based investment advisory firm wrote. “That’s how it works. It’s not meant to be intellectually satisfying. It’s meant to take money away from people who think they can explain things. Worst traders and managers I know are the guys with answers for all this stuff. Get used to it.”
Instead of “after the fact to look smart,” let’s allow our call of the day to give some forward-looking flavor on where he believes all this is headed.
Mike Wilson — hailed across Finance Twitter as “Wall Street’s most bearish analyst” — says there’s one big risk out there for investors…
That he’s right.
“The macro and micro economic data continue to deteriorate,” Morgan Stanley’s chief investment officer wrote, pointing to weak durable goods orders, disappointing capital spending, soggy retail earnings, lackluster freight shipments, and a “very soft” jobs number as evidence of an economy running on fumes.
“This raises the risk of my core view playing out — that companies will do whatever it takes to protect margins,” Wilson wrote. “And while labor is the last lever they pull, they will use it if they need to.”
Don’t be so quick to blame U.S.-China trade tensions, either, he said. “The economy was already slowing and escalation potentially makes things worse.”
And if you’re waiting for a lower interest rates to ignite a rally… don’t.
“A rate cut after a long hiking cycle tends to be negative for stocks, in contrast to a pause like in January, which is typically positive,” Wilson said. “I’ve been vocal about the likelihood of U.S. earnings and the economic cycle disappointing this year. Specifically, I’ve argued that the second half recovery many companies have promised and investors expect is unlikely to materialize.”
He’s not seeing enough evidence to change his mind. In fact, Wilson’s team is looking for GDP to hit the skids in the second half.
“If you listen to what the markets have really been saying this year, they seem to agree with our view that growth will disappoint whether there is a trade deal or not,” he said. “Therefore, we continue to recommend investors stay defensively positioned… with overweights in areas like utilities and consumer staples.”
The DowDJIA, +0.67% , S&PSPX, +0.84% and NasdaqCOMP, +1.61% are off to a positive start. OilCLN19, -0.06% is leaning lower, while goldGCQ19, -0.95%takes a risk-on breather. The dollarDXY, +0.28%is up after last-week’s job-related hit and the Mexican pesoUSDMXN, -2.1448%is on a tear.
Europe stocksSXXP, +0.18%are up and Japan’s NikkeiSHCOMP, +0.86% led the rest of AsiaADOW, +1.08% higher.
Put the stock market on the back burner and focus on refinancing that mortgage. As our chart of the day from Black Knight shows, almost 7 million people are now eligible to save at least 75 basis points, that’s a million more than a week earlier.
Where does MicrosoftMSFT, +1.77%go from here? The software giant just surged into record territory and is now valued at more than $1 trillion. AmazonAMZN, +3.86%and AppleAAPL, +1.88% , both well below their highs, are a distant second and third, respectively.
“The Golf On Your Own Damn Dime Act of 2019” — That’s former White House ethics chief Walter Schaub criticizing the Trump for those pricy golf outings. “How about a law that says anytime POTUS visits a property on or adjacent to a golf course, he/she must pay for all costs incurred by the entourage from the minute he/she left the White House until he/she is back inside the White House?” Schaub tweeted after Trump ran up a big tab on his visit recent to his course in Ireland.
How did his round go? Here’s one of the lowlights:
$150 billion — That’s how much the video game space will be worth this year, according to research firm Newzoo’s latest estimates. The industry’s’ biggest event of the year — the Electronic Entertainment Expo (E3) — kicks off Tuesday. Get ready for plenty of product buzz.
A light data calendar today includes the Job Openings and Labor Turnover Survey at 10:00 a.m. Eastern. Retail sales is the big number to watch, but that’s not until Friday. Before that, the Consumer Price Index will be released Wednesday.
While much of the rest of the world embraces credit cards and virtual payments, Germany is sticking with cold, hard cash.
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Nerd alert! These old friends have been playing Dungeons & Dragons for a long — LONG — time.
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