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  • ETF Tracker Newsletter For August 16, 2019

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    [Chart courtesy of]

    1. Moving the markets

    After yesterday’s lackluster session to nowhere, the markets found some upside momentum, with the ensuing relief rally reducing some of the losses sustained on Wednesday.

    Trying to calm matters was St. Louis Fed President Bullard’s remarks that inter-meeting action would not be necessary, referring to the fact that there is no Fed meeting in August, and that a couple of weeks one way or the other won’t matter.

    Then this gag order hit the wires: Fed Chair Powell has banned any public appearances by any Fed Board member, noting that “appearances at conferences have been canceled, all scheduled interviews have been abandoned and any comments on or off the record are outlawed.”

    One analyst interpreted this unprecedented action as a reflection of two pressures:

    First, economic indicators increasingly suggest the US is heading into a recession with the Dow plunging 800 points on Wednesday.

    Second, relations with the White House have reached a new low, with president Trump pinning the success of his presidency upon a strong economy as a recession – Trump believes – would destroy his reputation and kill his reelection chances. As a result, Trump has – correctly – blamed the current woeful state of the global economy on the Fed. The problem is that Trump also “owned” the same state of both the economy and the market for the past two years, so any recession will be entirely his, just as Yellen (and Bernanke) intended, and shift attention away from the Fed.

    On the economic side, data was dire, maybe that’s why markets rallied, as Consumer Confidence crashed in August to 92.1 from 98.4 missing all forecasts as per Bloomberg’s survey of economists. Then Housing Starts plunged by a whopping 4.0% MoM and missing expectations for a 0.2% rise. And that despite tumbling interest rates and rising mortgage applications

    But the story of the week was bond yields, with the 30-year seeing its biggest crash since August 2011, as it fell to a record low and crossed the 2% level to the downside. As I posted before, the race to the bottom is on, and lower rates appear to be on the menu, with now $17 trillion of global bonds being negative. It’s only a matter of time until we get there as well.

    That is, unless a Black Swan event suddenly reverses that trend and catapults yields considerably higher. It looks to me that volatility and uncertainty will be with us in the foreseeable future.