Both equity and interest rate markets were pretty darned tame today–and our feeling is that investors should enjoy tame days when they occur.
With the political turmoil we see occurring, plus telltale signs that there are some cracks in the economy, we have the distinct “feeling” that it is going to be a very rocky second half to the year.
We see Wells Fargo laying off mortgage employees in the Midwest–300 in total I believe–business is slow. Not a huge surprise–inventories are low and wages simply have not risen much for the “move up” buyer–folks are sitting tight.
Today Harley announced they planned to move some production off shore to get around the tariffs imposed by the EU and POTUS promptly attached Harley–we don’t need that and for sure it is something that should have been expected.
The ag community is getting crushed as soybean and corn prices have gone off a cliff as the tariffs with China get closer and closer (a July 6th effective date). This is just 6 weeks after prices spiked higher on news that China was doing away with ag tariffs in exchange for an agreement not to sanction Chinese company ZTE. Many people in non ag states believe that poor farming profits have little affect on them personally you can be certain that deep troubles in the midwest reverberate through the entire economy.
Even with this turmoil markets are looking for an interest rate increase in September–although the more turmoil that occurs, the higher likelihood that the FED could take a pause. This is one that is yet to be determined.
And of course we have the political turmoil. In one breath I am disgusted with the behavior of supposedly semi intelligent people–then I stop and think about the activities around Viet Nam in the 60’s and early 70’s. While I wasn’t a big anti-war protestor as I was a couple years too young my first year of college I did participate in some–lots of angry people. So I guess now, like then, will pass and all will be better.
Pour on top of the items above the budgetary problems of the country–including Social Security and Medicare and we about have our hands full. Not certain how these will be resolved in the current environment, but at some point congress, with a gun to their collective heads, will come together for at least a partial fix.
So with this laundry list of items we now are starting to feel less confident in our prediction of a 10 year treasury at 3.25% by the end of the year. The more global turmoil the more folks move to the safe haven investment of U.S. treasury debt–guess that’s good since we have more than enough to sell to them.