Market Commentary for Week Ended 10/11/2019

Market Commentary for Week Ended 10/11/2019

by David Rasmussen on Oct 11, 2019

De-Escalation Leads to Elation

The S&P 500 is up about 4.5% from the lows set last Thursday after the disappointed ISM Non-Manufacturing number that we highlighted last week.  The collective narrative for the rally appears to geopolitical developments, both Brexit clarity and de-escalating trade tensions between the US and China.  

As it currently stands Chinese Vice Premier Liu He, US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are meeting to see if they can reach some sort of agreement to mitigate an increase in tariffs scheduled to go into effect on Oct. 15th.  Here is a Reuters article that summarizes the timeline of the US-China Trade conflict (click here).  To summarize there have been 32 escalating events between the US and China since June 28, 2016.  On that date, while he was on the campaign trail, Trump stated that China’s entrance into the World Trade Organization enabled the “greatest jobs theft in history.” From then on there have been 13 attempts to come to an agreement.  You would think that after such a long conflict the market would need some proof before reacting.  While writing this commentary the market is up 4.5% in about a week on trade deal hopes.  Fool me 13 times shame on who, how saying go?


Economic Data Recap

Here is a summary of the notable economic data points released during the week.

  1. Jerome Powell Spoke each day from Monday – Wednesday at the 61st National Association of Business Economics Annual Meeting.  During the conference Jerome revealed a plan to buy T-bill’s to add liquidity to the overnight money market.  He stressed that this is not a quantitative easing program.
  2. Purchasing Price Index (PPI) – Inflation amongst producers unexpectedly declined -0.3% versus a consensus increase of 0.1%.  Declining prices at the producer level bolsters the case for further easing by the Federal Reserve.
  3. Consumer Price Index (CPI) – Inflation at the consumer level came in unchanged for the month of September.  This was inline with expectations from economists