iTrust Daily Insight

1st November
iTrust Daily Insight

Edition 11.1.2019

November 1 — News and Analysis to Inform your Trading Day

The day after: now all the things are in the rear-view-mirror; what happened? how’d we do? 

Market data 10:30 am California time, 5:30 pm London time

  • Bitcoin:  $9,204 (down $200 this week after increasing ~30% the previous Friday to Monday) (Source: Coinmarketcap.com)
  • Digital currency price movement today: generally down 1-2% today; Stellar up over 7% today (Coinmarketcap.com)
  • Number of digital currencies with market cap over $1 billion: 13  (Coinmarketcap.com)
  • Market Capitalization of Bitcoin: $165.9 billion (Coinmarketcap.com)
  • Gold “F” futures contract: $1510 (source: Yahoo Finance)
  • Silver “F” futures contract: $18.01 (source: Yahoo Finance)
  • Copper “F” futures contract: 2.6605 (Yahoo Finance)
  • Oil “F” futures contract: $55.59 (Yahoo Finance) 
  • DJIA: $27,300 (today’s gains reverse yesterdays losses)  (Yahoo Finance)
  • S&P 500: $3,062 (would be an all-time-high close) (Yahoo Finance)
  • FTSE (main London stock index): 7,302 (unchanged this week; ie Brexit votes didn’t matter) (Yahoo Finance)
  • Shanghai stock index: 2,958 (unchanged this week) (Yahoo Finance)
  • VIX (volatility implied in near contracts of S&P 500 futures in US): 12.6% (relatively low; reflecting little purchasing of down-side protection) (Yahoo Finance)
  • Result of Fed’s meeting on Oct 30: US central bank cut overnight rates 1/4%, as expected; now the target is a range of 1.50% –> 1.75% (source: Federal Reserve)
  • Probability O/N rates are unchanged from current rates (1.50%-1.75% target range) after Dec 11 FOMC meeting: 90%%
  • Probability O/N rates are 25 bps lower than now after Dec 11 FOMC meeting: 10% (down from about 20% before Wednesday’s announcement)
  • US 10 year Treasury yield: 1.74%  (WSJ.com)
  • US 2-10 yield difference: +0.17% (i.e., positively sloped — normal — yield curve) (WSJ.com)

Review of all the big news:

  1. It is cloudy and overcast in London today.  For those who are regular readers of these updates you know this is a tongue-in-cheek way of saying that the “big” October 31 deadline for Brexit was likely at most to cause some short term disruption which would be quickly resolved.  Now that the decision has been passed from Parliament to the people and the date has been shifted from October 31 to December 12, our basic analysis is unchanged: there will eventually be an end to the Brexit drama.  We do not know how the drama will end, whether the UK will remain in the EU or whether the UK will leave the EU.  In any event, the event will happen and any hiccups will be short-lived and quickly resolved.  The wet blanket slowing down the UK economy will be taken away and economic fundamental will return to a higher base rate.  So, on December 13, it will probably be overcast in London.
  2. The positive which seems maybe to have been missed is that, effectively, the chance for a “hard Brexit” has already been removed.  Either the UK will depart with an agreement (a soft Brexit) or the UK will remain in the EU.  Even though the financial markets have not yet appreciated this fact, we believe the world economy is now on a stronger footing than it was a few days ago.  
  3. As expected, the Democratic (opposition) Party-controlled house passed a resolution regarding the process whereby it will gather evidence to pass along to the Senate so that the Senate can consider that evidence (so called “articles of impeachment”).  We continue to believe this is all just political theater and there is almost no possibility the Senate will vote to convict the president and force President Trump from office.  The Republican party controls the Senate and a 2/3 vote is necessary to convict.
  4. Also as expected, the US central bank cut interest rates by 25 basis points (1/4 of a percentage point) on Wednesday.  
  5. Also on Wednesday, the US Central Bank did a good job setting expectations regarding future rate actions.  The bond market rallied now that inflation is less of a threat.  Inflation is a direct result of more money, which gets printed when central banks lower interest rates.  Other markets had little reaction.  But the US stock market continues its slow, steady climb to all-time highs (as measured by the S&P 500 stock market index).
  6. US 3rd quarter GDP is estimated to have grown 1.9%.  This is higher than Wall Street’s expectation of 1.6%-1.7% growth.  We will offer a fuller commentary on this during our weekly recap this afternoon.
  7. The jobs report was released today.  Most importantly, wages are up 3%.  This creates more potential for saving AND for spending.  The “headline number” is that the US economy added 128,000 new jobs.  This positively surprised the markets because the GM strike caused lots of workers to be temporarily out of work.

We are doing our best to keep you informed and to help you make good investment decisions based on your own analysis of these factors.  Even so, if there is any confusion about what we have written today OR how these factors can be turned into questions for your own consideration, please call us here at iTrust Capital.  We’d be thrilled  to get to discuss any of these issues with you over the phone.  Please direct all questions primarily to Blake Skadron.  If somehow Blake is not able to assist, a member of iTrust Capital’s Economics Team would be happy to chat with you directly.

Tim Shaler is Chief Economist of iTrust Capital.  He is a published Real Estate economist, was a portfolio manager and asset allocation expert at his previous firms and is an adjunct professor at Webster University. His MBA (Finance) and MA in Russian Economic History are both from the University of Chicago.

For all media inquiries, please contact Blake Skadron at b.skadron@itrustcapital.com.

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