Market Brief – 6/6/19

Investors continued to buy stocks following yesterday’s rally despite news from the Trump Administration that we are “moving toward path” to implementing tariffs on Mexico on Monday. In addition, President Trump threatened to put tariffs on an additional $300 billion of imported goods. Consumers should start to see price increases from the latest round of tariffs against China that are going into effect right now.

U.S. exports to China hit their nine-year low in April, but our trade deficit with China also fell due to a drop in imports. Heavy-duty truck orders fell -70% in May, which is the worst drop in new orders since July 2016.

Stocks closed higher as investors are hoping that a quick resolution with Mexico will send stock prices to new all-time highs. Treasury yields were flat on the day and have continued to ignore the stock market’s enthusiasm.

Physical gold is attempting to break through $1,240/oz, which is a price level that has been difficult to breach. Failure here will send gold prices lower before another attempt to break out of this five-plus year consolidation pattern is made.

Agricultural commodities shrugged off yesterday’s selling as buyers pushed prices back over their 100-day moving average. Since rallies start with a crossing and a reconfirmation of a major moving average, today’s price action should be considered bullish.

The broad M2 Money Supply came in at 4.18% on an annualized basis, which represents a slight increase in the growth rate of the money supply since April. The annualized rate of change followed the 6- and 3-month growth rates higher, which came in at 2.36% and 1.43%. If the shorter term growth rates are accurate, then the annualized growth rate of the month supply should continue to rise. Give the Fed is still tightening and investors are calling for a rate cut, it is rather impressive to see increases in the growth rate of the money supply.