(Washington)

Donald Trump’s surprise victory in 2016 was preceded by a nice run-up in markets, and the same thing seems to be happening right now. The market’s continued rise appears to point to an underlying confidence in the economy, and the more it goes up, the more out-of-touch Democrats’ negative attacks on the US economy and society may seem to voters. “The markets are starting to embrace the idea that Trump wins reelection. Most of the people in the markets don’t like him personally, but they like his policies”, said a veteran fund manager at AGF investments.

FINSUM: We have to agree with the assessment that a continued rise in the economy and markets would not be favorable to Democrats’ chances.

(New York)

A lot of of investors don’t really know what to do with Wall Street equity research. While certain analysts are very insightful, the misaligned interests and intentional underestimation sometimes make it hard to separate what to listen to from what to ignore. However, there is a clear way to make purchases based on Wall Street forecasts—when there is a heavy consensus on a stock, buy it. The key signals to look for are when price targets are similar across all analysts, and when all are saying “overweight” or buy. Such occurrences are not as common as many might think, but they are very potent when they do appear.

FINSUM: This makes some sense as equity research analysts are a reflection of the general sentiment amongst institutional investors. If all seem to be positive, then the underlying feeling on that stock is bullish.

(New York)

Gold just took the jobs report on the chin. As our readers will know, the US jobs report from Friday was nothing short of stellar, with the job creation numbers blowing away all expectations, and in doing so, lowering the odds and potential pace of Fed rate cuts. That led to a big sell-off in gold on Friday that followed an even larger one Monday. Gold lost almost 4% over just two days last week.

FINSUM: The jobs report simultaneously sapped gold of the fear boost it gets from worries about the economy, as well as the potential benefit of lower rates.

(Washington)

Will the US and China make a substantial trade deal? That is a trillion Dollar question for markets. Some argue that China may defer doing any deal and take the risk that Trump does not win the election, effectively letting the clock run out. However, an astute view is that China might be desperate to do deal while Trump is still in office. The reason why is that if Trump were to lose to a Democrat, who in all likelihood would be a more conventional US president that takes a much friendlier approach with international allies, then China would be in a very compromised position. A Democratic president would likely approach the Chinese trade deal with a much more united front of trade allies, which would be a worst case scenario for Beijing.

FINSUM: The irony of this is that Trump has been by far the hardest president on China in memory, but at the same time, the Chinese have the best chance at a good resolution by dealing with him.

(New York)

The yield curve inversion has largely faded from headlines. Things that become the status quo often do! But in that development lays a hidden but worrying truth—the longer the yield curve is inverted, the more likely it is that there will be a recession. The inversion has been in place for over a month now and it is actually getting worse, with long-term yields continuing to drop. A yield curve inversion has proceeded every US recession in the last 50 years.

FINSUM: If the Fed proceeds with cuts, it seems like the inversion may abate. But then again, the rate cut would be an implicit admission that we are on the way to a recession.