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iTrust Daily Insight

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6th November
iTrust Daily Insight
Edition 11.6.2019

November 6 — News and Analysis to Inform your Trading Day

Market data 8:30am California time, 11:30am NY & Boston time; 4:30pm London time

  • Bitcoin:  $9,446 (basically unchanged today) (Source: Coinmarketcap.com)
  • Digital currency price movement today: mixed over last 24 hours; most coins up 1% to down 1% (Coinmarketcap.com)
  • Number of digital currencies with market cap over $1 billion: 13  (Coinmarketcap.com)
  • Market Capitalization of Bitcoin: $168.5 billion (Coinmarketcap.com)
  • Contract origination price on near Bitcoin futures contract: $9,405
  • Gold “F” futures contract: $1490 (source: Yahoo Finance)
  • Silver “F” futures contract: $17.56 (source: Yahoo Finance)
  • Copper “F” futures contract: 2.6860 (Yahoo Finance)
  • Oil “F” futures contract: $57.25 (Yahoo Finance) 
  • DJIA: $27,495 (basically unchanged but at very close to all time highs)  (Yahoo Finance)
  • S&P 500: $3,073 (also very close to all-time-high yesterday) (Yahoo Finance)
  • FTSE (main London stock index): 7,389 (Yahoo Finance)
  • Shanghai stock index: 2,979 (Yahoo Finance)
  • VIX (volatility implied in near contracts of S&P 500 futures in US): 13.0% (Yahoo Finance)
  • Probability O/N rates are unchanged from current rates (1.50% to 1.75% target range) after March 2020 FOMC meeting: 66%
  • Probability O/N rates are at least 25 bps lower than now after March 2020 FOMC meeting: 34% (source: CME Group’s “CME Fed Watch Tool”)
  • US 10 year Treasury yield: 1.84%  (WSJ.com)
  • US 2-10 yield difference: +0.23% (i.e., positively sloped — normal — yield curve) (WSJ.com)Implied future 10 year inflation rate inferred from comparing July 2029 TIPS to cash 10 year Treasury bond: approx. 1.67% per year

Today’s big news:

  1. The biggest news events are the ongoing stories surrounding the impeachment process in the US, ongoing trade discussions between the US and China and the political process within the opposition Democratic Party in the US
  2. There seems to be very little change from what was previously expected on the political dramas within the US
  3. However, stories that the US and China may roll back some of the previously announced tariffs are seen as supportive of future prospects for growth and profits
  4. We believe the slowdown in US and European manufacturing is primarily a result of the recent trade tensions as well as previous anxiety about Brexit; we believe a lessening of these tensions & anxieties may allow the manufacturing slowdown to be reduced or end more quickly
  5. This is driving the US stock market to all-time-highs.  We believe the US stock market is “pricing in” (expecting) President Trump not only not to be removed from office but also to win re-election.  We believe the probability of his losing re-election in 2020 is likely higher than currently priced into the markets and that the political results last night from Virginia and Kentucky might be a harbinger of future other disappointments for the Republican party.  Local politics are always primarily about local issues but the vastly varying economic policies among some of the major contenders to represent the Democratic Party in the US general election for President in November 2020 remains the biggest macro event behind the potential for a trade deal with China
  6. One possible “upside surprise” for which we believe the markets would immediately expect big future growth would be a new regime of Intellectual Property protection inside China 

Analysis

  1. Some gold investors buy gold for financial safety in the event of a catastrophic event — so gold often goes up when geopolitical events get “hot” (ie the prospect for war goes up)
  2. Other gold investors buy gold based on concern for future value of fiat (paper) currency; gold is thousands-of-years-old store of wealth so if it looks more likely that paper currency is going to become worthless then gold buying can quickly increase in that country
  3. We believe digital currencies will likely play similar roles going forward

Please direct questions 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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