As I Mentioned Earlier This Week

The title of today’s post comes from Michael Hartnett, main investment strategist at Merrill Lynch. This week As I pointed out previously, I visited to see Hartnett on Tuesday when he provided a lunch-time presentation to a packed room. I have discussed Hartnett’s views on several occasions, so I am a fan certainly.

While his work is less quantitative-driven than several other analysts, he has a distinctive way of turning macro developments into interesting market thoughts. His theme lately has been “I’m so bearish, I’m bullish”. Hartnett points out that while Wall structure Road retrieved from the credit problems mainly, Main Street America is constantly on the struggle. Real income growth has been negligible, and the unemployment rate remains stubbornly high.

This means that Federal Reserve policy will stay very accommodative. Heir apparent Janet Yellen seems to favor the current Bernanke plans of using financial policy to try to increase employment. Meanwhile, corporate America appears to be doing fine just. Record income have continued. Corporate cash surpluses stand for about 2% of GDP relating to Hartnett, which is also at record levels. There aren’t any huge, apparent risks on the horizon (Europe isn’t blowing up, the U.S. Earnings is doing fine and there’s no inclination that any major central bank or investment company is in the disposition to tighten plan. Therefore, the thinking is to buy shares obviously.

Besides being bullish on equities, Hartnett views real estate being a winner within the next year or two. Alternatively, he feels that interest rates will gradually increase over another 18 months as more signs appear that the global economies are finally showing signs of strength. This environment would be bad news for bonds certainly.

1.1 trillion of Treasuries to retaliate against U.S. It’s seen as a nuclear option that would inflict more damage on China’s economy than America’s. 15.9 trillion Treasuries market — never to retaliate, but to guard its money if it goes into a free-fall. The offshore Yuan has slumped 2.6% this month to about 6.92 per buck as the trade standoff intensified, since December achieving the weakest. The specter of Treasuries being deployed as a weapon in the trade spat surfaced via a tweet from a Chinese journalist on Monday, having said that the nation’s scholars are ‘discussing the possibility of dumping” U.S.

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May 16 – Bloomberg (Allan Lopez): “High-yield corporate and business bond funds saw the speed of outflows speed up as the U.S. China continued to clash over trade, souring sentiment across marketplaces. 2.57 billion from retail funds in the every week reporting period finished May 15, according to data from Refinitiv’s Lipper. May 11 – Wall Street Journal (Lisa Beilfuss and Gunjan Banerji): “Martin Rogers has been regularly trading options from his cellular phone since last summer months, after dabbling in derivatives and stocks for years.

A pharmaceutical consultant…, Mr. Rogers is often on the road and has been attracted to the ease of trading between meetings and the possibility of high profits. 100 and get 100% come back on it,’ Mr. Rogers said. When he first began trading options, he was blown by the results away.

‘Just taking a look at how powerful it was to generate income … it was hard for me to sleep for two days.’ Mr. Rogers is one of the ranks of specific investors looking to magnify bets on shares. ‘ Mr Trump said in a group of tweets. He added it could not maintain Beijing’s interest to retaliate because manufacturers would just change creation from China abroad. ‘There will be nobody left in China to work with,’ he continuing. Bad for China ‘Very, very best for USA!  . . . Therefore, China should not retaliate – will only get worse!

May 14 – NY Times (Ana Swanson): “President Trump’s tariffs were initially seen as a cudgel to pressure other countries to drop their trade obstacles. But they look like a more long-term tool to shelter American industry increasingly stop imports and banish an undesirable trade deficit. A lot more than two years into the Trump administration, the United States has surfaced as a nation with the highest tariff rate among developed countries, outranking Canada, Germany, and France, as well as China, Turkey, and Russia. 250 billion worth of Chinese goods would benefit America, which he was looking ‘very strongly’ at imposing additional levies on nearly every Chinese import. ‘I think it’s going to turn out extremely well.

We’re in an exceedingly strong position,’ Mr. Trump said… ‘Our economy is fantastic; theirs is not good. May 12 – Reuters (Jan Wolfe): “President Donald Trump said on Sunday that America is ‘right where we want to be with China,’ adding that Beijing ‘broke the offer with us’ and then wanted to renegotiate. ‘We will be taking in Tens of Billions of Dollars in Tariffs from China. Buyers of the product makes it themselves in the USA (ideal), or buy it from non-Tariffed countries,’ Trump said on Twitter.