Weighing The Week Ahead: Has The Trump Trade Reached The Tipping Point?

The economic calendar is normal, with an emphasis on inflation data and the Fed. The increased intra-day volatility, often driven by overnight comments in China news or a Presidential tweet, has everyone’s attention. Even Fed punditry will take a back seat. With an increased sense of urgency, many will be wondering: has the Trump trade reached the tipping point?

Last Week Recap

In my last edition of WTWA I asked whether stock prices had veered from the fundamentals. That was a good guess, since the topic was popular in discussions all week.

The Story in One Chart

I always start my personal review of the week by looking at a great chart. I always start my personal review of the week by looking at a great chart. I especially like the version updated each week by Jill Mislinski. She includes a lot of valuable information in a single visual. The full post has even more charts and analysis, so check it out.

The loss this week was only 1.4%, but the dramatic daily moves made it seem like more. The trading range was 4.8% including 3% in a single day. I summarize actual and implied volatility each week in the Indicator Snapshot.

The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too.

Feel free to add items that I have missed. Please keep in mind that we are looking for current news, especially from the last week or so. WTWA is not about long-term concerns like debt. These are important, of course, but not our weekly subject unless there has been some major change.

The Good

High-frequency indicators, although softening a bit, remain solidly strong. Check out New Deal Democrat’s valuable weekly report.

March Auto sales were strong, especially at GM. (Automobilemag).

Earnings guidance has been strong, especially in tech. (FactSet).

ADP private payrolls gained 241K, about the same as last month, but beating expectations of 203K.

February Factory orders rebounded to a gain of 1.2% from January’s 1.4% decline. This was still a little below expectations.

Rail traffic is up 5% year-over-year. (Steven Hansen, GEI). Truck shipments are also improving on a year-over-year basis.

Sentiment remains bearish, a contrarian indicator. Bespoke.

The Bad

ISM index for March registered 59.3 declining from the prior 60.8 and missing expectations of 60.0. Scott Grannis takes adeeper look and sees strong numbers.

ISM services for March registered 58.8 narrowly missing expectations of 59.

Construction spending for February gained only 0.1% v expectations of 0.5%.

Initial jobless claims spiked to 242K from last week’s 218K.

Nonfarm payroll employment increased by only 102K net jobs, missing expectations of 175K. The prior two months were revised lower by 50K. The Household survey was also weaker than expected, although other metrics were unchanged. James Picerno combines the headline data in this chart:

The Ugly

An unwanted Korean war? Foreign Affairs explains how it could happen. Secret direct talks suggest that there is some progress in mitigating this threat. The planned summit between President Donald Trump and North Korea leader Kim Jong Un should be watched closely. Stratfor (via GEI) has a deeper look about why the current situation is concerning.