|Day's Range||0.00 - 0.00|
|52 Week Range|
It’s been more than a month since U.S. equities lagged behind their global peers on consecutive days. Perhaps it’s just a reflection of investors deciding it’s a good time to cull some gains with U.S. stocks among the best performers this year, especially on a currency-adjusted basis. The escalating trade war between the U.S. and China has taken a turn for the worse, and nobody is really sure how much damage it will do to profits.
Brazil's benchmark stock index reached an all-time high earlier this month and is up 8.6 percent for the year. Investors in Brazil and across the world are betting that President Jair Bolsonaro will push through key changes to the social security system in Latin America's largest economy. The stakes are high for pension reform in Brazil because an improvement could boost the country's flagging economy and give it some stability.
Clearly, investors were overjoyed with the prospect that the Fed had their backs. The concern here is that the Fed’s moves will only serve to suppress market rates, putting further pressure on the already razor-thin difference between the short-term rates banks pay on their own borrowings and the long-term rates they charge lenders. In the banking business, this is known as the net interest margin.
Not only that, stocks are on track for their best quarter since soaring 15 percent in the July through September period of 2009. “The pain trade for stocks is still up,” Michael Hartnett, the chief investment strategist at Bank of America, wrote in research note Tuesday. The firm’s closely monitored monthly investor survey found that allocations are just a net 3 percent “overweight” to global equities, the lowest level since September 2016.
Indexes that measure the cost to protect both investment- and speculative-grade U.S. corporate bonds from default fell to their lowest levels since October, a sign of optimism about borrowers’ ability to pay their debts. The credit-focused investment firm announced that it was selling a 62 percent stake to Brookfield Asset Management in a deal worth about $4.7 billion. Well, for one, Oaktree’s chairman and co-founder is the legendary Howard Marks, who built his fortune as a vulture investor in distressed debt.
Breakeven rates on two-year Treasuries — a measure of what bond traders expect the rate of inflation to be over the life of the securities — has risen to the highest since May. In addition, the difference in yield between bonds due in 10 years and longer-term debt due in 30 years – a part of the curve that’s less influenced by Fed policy – is the widest since 2017. To be sure, no one is calling for runaway inflation. At 1.90 percent, the two-year breakeven rate is below the Fed’s 2 percent inflation target.
The Australia dollar is usually one of the major beneficiaries of a global “risk on” rally in markets like the one this year given its close economic ties to China. The latest decline came as Reserve Bank of Australia Governor Philip Lowe shifted to a neutral policy outlook as he acknowledged increased economic risks at home and abroad. Indeed, the nation’s economic data has been consistently falling below analysts’ forecasts since the beginning of December as measured by the Citi Economic Surprise Indexes amid a weakening housing market and high consumer debt loads.
Brazilian stocks are off to a hot start this year, with the country's benchmark index rising more than 8 percent in 2019. The jump in Brazilian shares comes as investors cheer the possibility of key reforms being passed by new President Jair Bolsonaro, including changes to the country's pension system. Bolsonaro is "hitting all the right notes the market has been wanting to hear for years," says one strategist. "That's why I think the market reaction has been so positive.
Fed Chairman Jerome Powell may have just come up with a new one for market participants to debate: substantially. At the Economic Club of Washington, D.C., on Thursday, Powell said the central bank is sticking with its process of shrinking its balance sheet assets to a more normal level, which removes stimulus put into place to revive the economy after the financial crisis and recession a decade ago. The balance sheet, which reached a peak of $4.52 trillion before falling to a recent $4.06 trillion, “will be substantially smaller than it is now” though bigger than it was before the crisis, Powell said.
The more than 60 economists surveyed by Bloomberg don’t forecast gross domestic product falling below 2 percent until 2020. The widely followed cyclically adjusted price-to-earnings ratio developed by Yale University Professor Robert Shiller compares the S&P 500 Index with its average earnings over the previous 10 years to account for economic swings. The current CAPE ratio suggests that stocks are trading near their long-term average risk premium when compared with bonds, according to Bloomberg Intelligence.