Trump, Treasurys, and You

The thing about politics is nobody knows anything. We learnrned that in November 2016.

There’s a particularly high degree of “know-nothingness” in Washington these days. That creates a lot of uncertainty.

Markets are reacting to it… and that’s really good news for us, actually, because it makes our work that much easier.

I don’t much care either way for “MAGA,” walls, coal, or even tariffs, for that matter.

I do concernrn myself with how those things might impact markets – the U.S. Treasury market, in particular.

Usually, we focus on stuff like the upcoming reports on the housing market. We’ve seen signs of weakness in June and July, so August will provide an important set of data.

But, still, markets are moving more than ever to political winds.

We saw that on Monday, as stocks opened lower on worries of an escalating trade war with China.

And, yet, this mornrning the S&P 500 Index gapped up to a new intraday all-time high.

Volatility: It’s our friend.

Of course, it’s not so much the S&P 500 we’re concernrned with. It’s yields on U.S. governrnment debt we follow.

They move, too, sometimes a lot…

But volatility in the Treasury market is our friend – and it can be your best friend…

I’d love to show you how. In fact, I’m hosting a presentation on September 25 where I’ll explain the simple and easy system behind a “two-hour work year”…

Data Dumps

Our attention now is on that housing data.

It’s not likely to have much impact on the September 25-26 meeting of the Federal Open Market Committee. The Fed is pretty much locked in for another quarter-point rate hike next week.

But inflation pressures did abate last month.

Both the headline and the “core” Consumer Price Index (CPI) readings came in below consensus forecasts. Headline and “core” producer prices were also short of estimates.

Headline CPI came in at 0.2% against an expectation of 0.3%. “Core” CPI, which excludes food and energy prices, was up 0.1% versus a consensus estimate of 0.2%.

August’s Producer Price Index (PPI) declined by 0.1% versus an expected gain of 0.2%. “Core” PPI was also down 0.1% against a forecast gain of 0.2%.

And, while retail sales were up in August, it was the smallest gain in six months.

Nonsense and Cents

More weakness in a critical part of the broader economy might/should give our monetary policymakers pause.

But we don’t know how the Fed will interpret the data. Indeed, the Fed doesn’t know how the Fed will interpret the data.

It must be concernrned about raising the cost of money this late in a recovery cycle. But it also must be concernrned about having “dry powder” in case of another downturnrn.

“Dry powder” means “room to cut interest rates,” in short. So, it has to raise rates before it can lower them.

Makes perfect sense…

Well, I’m glad for the nonsense.

Because it’s the uncertainty – and the volatility that comes from it – that creates opportunity.