The Markets Are Screaming…
And It Makes No Sense
Rodney Johnson | June 25, 2019 | Late last week, on the first day of summer, I watched the news and weather for a few minutes before my morning run. It was 85 degrees with 97% humidity. It was 4:40am. The meteorologist said the "feel like" temperature was 99 degrees. I ran anyway. It was awful. Such is life on the Gulf Coast this time of year. We can count on a lot of things, including heat, storms, and mosquitos. And we watch out for bigger things that are possible if not certain, like hurricanes. I've lived through my fair share of the latter living on both sides of the Gulf. We have "go bags," backpacks filled with a few essentials, and we've identified what we'd take in terms of files, photo albums, and computers. We've never implemented the plan, but I don't mind spending the time and money on it because the cost/benefit analysis is compelling. This year I've got a few more things to worry about, like our new golf cart rental business on the coast. In the event of a storm, we'll need to get 30 golf carts over to storage, which is no easy task. And I've got my house on the market. If you're not a coastal dweller, you might not know that insurance companies won't write new coverage on a home if there's a named storm swirling around. It could be 1,000 miles away, but that doesn't matter. This is where the old axiom about separating what you can control from what you can't comes to mind, and it brings me to the markets. We're in a protracted trade spat with China, but the Chinese economy was already slowing before that started. U.S. manufacturing has eased back to almost even between expansion and contraction, and both the Federal Reserve and ECB are signaling easy money ahead. Banks earn about 2.37% lending to each other overnight, which is more than the 2.01% they can earn if they bought 10-year Treasury bonds. The yield curve is partially inverted. The initial bump from tax reform is fading. The Atlanta Fed's GDPNow model shows GDP growth falling from 3.1% in the first quarter to 2.0% in the second. Earnings season is almost here. Corporate earnings fell 2.3% in the first quarter and, in March, analysts expected second-quarter earnings to decline 0.4%. They've now revised that number lower, to -2.6%. Third quarter earnings estimates have been revised from a slight gain to a slight decline. And the equity markets are near all-time highs. One of these things seems glaringly out of place… READ MORE » | 
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