Brief Update on Today’s Market Action

By 2019-06-04 October 3rd, 2019 Market Commentary

June 3, 2019

Investors’ fears were not appeased by this morning’s news that Mexico and China will continue to discuss trade with the U.S. Stocks moved down, while bond prices moved up and yields fell. Needless to say, not a good combination.

The spread between the US T-Bill & 10 Year Note remains inverted, which is a clear gloom and doom message from the bond market to the Federal Reserve (Fed). The Fed must get on the same page with the bond market in order to (a) prevent a meltdown in financial markets and (b) drive the economy into recession. Although the Fed has delivered some “dovish” comments and financial markets are pricing in a July Fed Funds rate cut (and one or two more by January), the Fed needs to make it happen.

During the last month, the Nasdaq moved about -10% and it tested the lows of March today at 7332.92. It is important that the index holds the support line. If it doesn’t, a test of the 7200 may be in the horizon, about -2% drop from current levels.

Antitrust fears in the technology sector served as another negative driver of today’s stock market behavior. The Tech sector is a main component of the S&P500 (about 26%). The fears affected stocks, including Google’s Alphabet (-6.15%), Amazon (-4.85) and Facebook (-7.34%).

Conclusion: A solid reversal does not seem to be at hand anytime soon, although a tweet or a rate cut may suddenly change the current environment. In the meantime, we are treating this market with respect and allowing our defensive positions to outperform.

Saul A. Padilla, RIA

Saul A. Padilla, RIA

Registered Investment Adviser and founder of Greenwich Creek Capital Management LLC, bringing over 37 years of experience in managing discretionary and non-discretionary investment portfolios for wealthy families and institutions. His main focus is to protect invested capital by re-balancing the allocation of cash, equities, fixed income and commodities, while closely monitoring macro-economic indicators and market trends to determine the transition phase between the completion of a Bull Market and the beginning of a Bear Market. He started his career in early 1987 mainly managing family financial investments.