Market Notebook
Discussion –
PRICE ACTION:
Equity prices, as measured by the ticker SPY, and bond prices, as measured by the ticker BND, closed marginally lower over the last week.
SPY -0.28%
BND -0.38%
TECHNICAL ANALYSIS:
SPY price appears to be trending higher.
BND price appears to be consolidating within a wide price range; however, price is now approaching the range highs. A break higher could signal positive price momentum.
SENTIMENT:
U.S. trade policy remains a significant factor in driving price volatility.
ECONOMY AND FUNDAMENTALS:
Economic fundamentals remain positive, with data suggesting the U.S. economy remains resilient in the face of geopolitical and trade-related turbulence.
Positive momentum in bond prices reflects a lowering interest rate environment, which tends to be accommodative to equities and asset prices generally.
It remains to be seen whether the U.S. will experience an inflationary spike in prices due to tariffs and trade-related issues. There are those economists who believe price inflation over the medium term is inevitable due to trade disruptions. Even so, the baseline scenario is that inflation will be moderate, i.e., 0.5% to 1% higher than otherwise would be the case. With the Dallas Federal Reserve’s trimmed mean PCE at 2.55%, the baseline scenario suggests inflation could rise to 3.5% over the next 12 to 18 months. While there is much political theater around the Federal Reserve’s interest rate policy, with conservatives suggesting rates should be lower, the current policy of holding rates steady seems to be correct. There is little indication that rates are constraining the U.S. economy at current levels.
CRYPTO CURRENCIES:
I’m adding a cryptocurrency section to the discussion. Digital currencies appear to be a diversifying asset class worthy of discussion. The crypto landscape is a fascinating place, whether it be regarding investor psychology or the technical aspects of digital coins. During the last week, Bitcoin printed a new high price with seemingly significant investor interest, including institutional buyers.
All the best during the week ahead!
Disclaimer: Nothing in this discussion should be considered investment advice. The content of this discussion is strictly my personal opinion and subject to change at a moment’s notice. Investment advice can only be provided to you by your investment professional and not by a general market discussion such as this one. If you wish to speak with an investment advisor, contact us. We can probably help.