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Market Brief – Monday 6/10/19

The Trump Administration and Mexico struck a deal to deal with the migrant immigration problem and the tariffs have been postponed indefinitely. This deal is being interpreted by investors as bullish for stocks, but keep in mind, nothing changed. U.S. equity futures opened higher in overnight trading to see if investors will back their bullish views by buying stocks.

U.S. investors backed up their weekend bullish bias by buying stocks as they remain hopeful the Fed will announce one or more rate cuts at an upcoming meeting. Investors have dropped all forms of portfolio safety as they chase this market higher, so they are in desperate need of the Fed to bail them out as the global economic data continues to deteriorate.

After no less than thirteen speeches by various members of the Federal Reserve last week, which was primarily done to pump up the stock market, the blackout period ahead of next weeks FOMC meeting means no more comments from the Fed until Chairman Powell’s press conference on Wednesday, June 19.

China’s May exports, in dollar terms, fell -1.1% on an annualized basis, beating expectations of a -3.2% print. Imports slumped -8.5% on an annualized basis, missing expectations of a -3.5% print. President Trump has threatened to increase tariffs on China should President Xi not meet with President Trump during the upcoming G-20 meeting in Osaka on June 28-29. There has not been a response from China in regards to a meeting during the G-20 summit.

The New York Fed’s recession-based probability model indicates a 36% chance of a recession in the upcoming twelve months. Any time their model has moved above 30%, a recession has occurred.

Agricultural commodities sold off during Asian markets but rebounded after U.S. markets opened on reports from Taiwan that the crop-destroying Fall Armyworm has arrived in Taiwan. The Fall Armyworm is currently wreaking havoc in fifteen Chinese providences. The broad agricultural commodity index rallied over its 100-day moving average in early trading.

Physical gold sold off in overnight trading after hedge-fund managers piled into gold as they expected the Trump Administration to enact tariffs on Mexico. Gold was rejected at $1,340/oz, which is overhead resistance. Look for gold to fall to the mid-to-low $1,200s/oz.

Treasury yields continue to ignore the stock markets euphoria as investors increase their short-Treasury bond trades in hopes that inflation is going to bloom. For those who think they missed out on the bond market rally, it’s not over yet. Ten-year Treasury yields closed at the same level as they did at the end of May.

Stocks closed the day higher but traded lower as sellers took advantage of higher stock prices. Crude oil closed higher but also traded lower ahead of tomorrow’s API report. Gold, along with the mining stocks, closed lower on the day.