(JPM on macro) US sentiment is more muted for the SPX as a whole although for the nearterm there is still more anxiety w/the SPX up at 2400 than was the case when the index appeared headed towards 2300 (i.e. despite the lead pg. 1 WSJ article Tues morning, “investor anxiety drops to new low”, the near-term pain trade feels like it may be to the upside). The biggest controversy at the moment is reconciling the recent commodity price slump and signs of softening Chinese nominal growth w/the broader global economic backdrop (i.e. are the implications of the commodity weakness pernicious or benign? Right now investors are leaning towards the latter conclusion).
(WSJ) Investors are shifting out of the US and into Europe.
(Politico) Republicans at “war” over taxes as some in the party want to push for “reform” while others are willing to settle for “cuts”.
(WSJ) Trump wants to decide on the Paris climate accord soon and will be hosting a series of meeting Tues to discuss the matter
(Bloomberg) “We are paying very close attention” to China’s policy tightening, said Ray Uy, head of macro research at Invesco Advisers Inc. in Atlanta. “Emerging markets would be the most vulnerable to any abrupt tightening in global financial conditions triggered by developments in China.” Even so, “the China story is far from over and is still one of the most compelling structural opportunities in the market.”
(Bloomberg) — DoubleLine Capital’s Jeffrey Gundlach recommends shorting the S&P 500 Index and going long on emerging market stocks despite conventional wisdom that rising U.S. rates will lead to a stronger dollar. Specifically, Gundlach recommended wagering long on the iShares MSCI Emerging Markets exchange-traded fund and betting against the SPDR S&P 500 ETF. He also said it’s a myth that the Federal Reserve raising rates necessarily leads to a stronger dollar.
(Bloomberg) – Pimco Sees 10-Year U.S. Yield Rising to 3% on Fed Hikes – The 10-year Treasury yield may climb to 2.75 percent to 3 percent over the “medium term’’ as the Federal Reserve will probably raise rates twice more this year, according to Pacific Investment Management Co. The likelihood of a reduction in the Fed’s balance sheet over the next couple of years will also bolster yields, said Mark Kiesel, Pimco’s chief investment officer for global credit
(Bloomberg) — Commodities investors needn’t fear the Federal Reserve. Raw materials perform best when the U.S. central bank is hiking rates, according to Goldman Sachs Group Inc., which used the findings of a study to buttress its overweight call on the asset class while acknowledging risks to its view. Raw materials do best during periods of rising interest rates, topping returns from equities and bonds, analysts including Jeffrey Currie said in a May 8 report.