(Washington)

President Trump has been complaining about the Fed’s hawkish behavior for several months. However, yesterday he seemed to escalate his discontent into something more specific. He told the media that he “maybe” regretted appointing Powell to lead the Fed. He said he was intentionally signaling the Fed that he wanted lower interest rates, but he acknowledged that the Fed was an independent entity. When pushed about the circumstances under which he would fire Powell, the President declined to comment.

FINSUM: Investors should keep an eye on whether Trump escalates his rhetoric into action. We doubt he will do anything about the Fed in the near term, but the market would certainly have a big reaction.

(New York)

There are a lot of dark clouds hanging over the market right now—trade war, rates, politics, Italy etc. However, one of the strong bright spots has been earnings. Company performance has been very strong, which has been a real boost against the headwinds. That is why this article scared us so much. Barron’s has run a piece analyzing earnings which shows that all is not what it seems. While earnings have been strong, with about three-quarters of companies beating estimates, what has been lost is that company’s are actually struggling with revenue, with only 58% beating estimates. That is the lowest percentage in six quarters, and shows that companies are having trouble hitting their sales goals.

FINSUM: Markets have reacted to this data, but not in a major way. We are quite worried about revenue struggles as it might indicate that consumers are tightening up and a recession could be on the way.

(New York)

Everyone know the housing market is facing some headwinds. Strong home price growth combined with higher rates is hurting demand. Accordingly, sales and new activity have been falling since the late spring. However, new data shows that home prices seem to have already entered a cyclical downturn that is only going to intensify. A combination of low affordability, slowing demand, and higher rates have conspired to bring down home prices, and it does not look like things will turn around quickly. The Fed is already warning about real estate being a “downside risk” for the economy.

FINSUM: The whole housing market seems to be slowly, but surely, stalling. Homebuilder stocks have been hammered, prices are falling, and rates are rising. It seems like we are in for a downturn.

(Rome)

Italy looks like it is in bad shape. It is openly defying the EU’s budget rules by running an excessive deficit, and what’s worse, it looks likely to be downgraded to junk status by ratings agencies. Moody’s already downgraded the country to Baa3, its lowest investment grade rating and just one rung above junk status. Yields have been swinging wildly on the country’s bonds as a result.

FINSUM: We are quite worried about the implications if Italy gets downgraded to junk, as it could mean lots of funds need to sell the bonds because of their mandates. What kind of sell-off could that spark?

(New York)

Monday seemed like it was going to be a good day. Chinese stocks surged mightily, which pushed up US equities ahead of the market opening. However, things quickly turned into a rout, with the Dow and S&P 500 getting wounded badly. Everything from worries over the trade war, to Italy’s budget, to Saudi Arabia are weighing on the market right now. Solid earnings are helping prop the market up, but markets are still down strongly in pre-market trading today.

FINSUM: Many investors are starting to ask themselves if this bull market has finally peaked. We think it is a smart question. That said, as long as economic performance continues strongly, we have a hard time imagining the market will fall too steeply.