June 4, 2019

Danger signs in the stock market

Doug Kass in twitter writes his reasons on why the bull market could be in danger.


The conditions that led to a market being able to recoup most of its late 2018 losses are no longer in place:

* We are closer to an earnings recession than in 4Q2018.

* At year end the domestic economy was prepping for a +3% Real GDP in Q1 2019 - now Real GDP is expected to slide to below +1.5%.

* The Cass Freight Index is showing profound weakness - and other high frequency economic data is weakening. 

* Markets have already priced in multiple interest rate cuts.

* With rates so low now (10 year yield down nearly 100 bps), there are few tools left in the monetary shed. 

* The prospects for any meaningful fiscal stimulation is gone (e.g., an infrastructure build) as the animus between the parties has intensified and will continue to erode as we move to a November, 2020 election.

* As mentioned in my opening missive, global coordination and cooperation is at an all-time low.

* A relatively smooth and non disruptive BREXIT is no longer likely.

* The trade backdrop is a mess - with disputes with Mexico and China (in particular) probably going to continue for quite a while.

* The geopolitical backdrop has deteriorated - particularly with Iran and North Korea.

* Commodities are falling (especially of a Jun 1 crude-kind).

* China's economic growth is no longer stable - it's moving lower (see last night's manufacturing data).

* Technical's have just begun to erode.

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