What You Need to Know Today

  • Powell re-states his commitment to CUT even in the face of stronger data

  • Mkts celebrate as other central banks chime in

  • Investors prepare for the coming earnings season

And it was Jay Powell – Part 2 – and he didn’t disappoint again…..investors/traders/analysts and the algo’s all loved it!  Powell did suggest (again) that the US central bank (FED) has room to ease monetary policy at the NEXT meeting and that my friends continues to send stocks higher….Recall that old adage – “Don’t Fight the FED”.  And not to be outdone….minutes from the ECB’s (European Central Bank) June meeting also suggests that they are likely to ‘inject fresh stimulus into the Eurozone in light of more weak inflation data’ – so it leaves that door open – will they cut rates further or will they re-launch their $2.92 Trillion bond buying program….Remember – ECB rates are flat to negative already. 

And then yesterday morning – the US ECO data was in fact strong, stronger than expected – leaving many to wonder what data is the FED actually looking at and can any of this change the narrative?  Don’t think so – first of all -he already has his statement prepared, he has already said that no matter that the data of late is a positive  surprise – the fact remains that they (FED) still  thinks we need to cut rates to keep this rally going…….…..CPI (consumer price index = inflation) came in at +0.01% (exp was 0%), Ex food and energy was +0.3% (exp was +0.2%) and y/y ex food and energy was 2.1% (exp was 2%), Init jobless claims were LOWER (bullish) and Real Avg Hrly Earnings were +1.5% (vs last months read of +1.3%)  (stronger).

Mkts surged on this news – and while once again closing lower than the intraday highs – we still managed to make history….the DOW added 227 pts to close above 27,000!, the S&P tested and kissed 3000 (for the 3rd time) and then backed off and closed at 2999.91 – setting it up for a spike up and thru 3000 today – but whether or not it holds has yet to be seen……..The Nasdaq and the Russell both backed off a bit and the Dow Transports  remain well below any high and appear to be stuck in the middle of the trendlines.  Which should cause some caution – but again – Don’t fight the FED!  Now look – the sense is that the FED is going to cut rates more than once this year – (FED funds futs are suggesting as many as 4 cuts – which is ridiculous)  and that is the risk…because how can that really even justify this one?   But even if we get one and then no more – expect the algo’s and the black box traders to throw a fit when they don’t get their way – and just imagine IF – earnings are not as bad as expected and the macro data for the next two weeks continues to be strong – What will the FED do then?  He has painted himself into a corner – it is almost impossible now for Jay Powell to do anything other than cut rates on the 31st – without causing a swift, painful, anxiety ridden sell off (can you imagine what the headlines would say then?)…..and don’t think it won’t happen.   it’s like living thru the terrible Two’s all over again.

And in another hit to FB’s Libra currency experiment – it seems that more and more people are chiming in…..Powell re-iterates his concern, questions the feasibility of even launching this product in the time frame indicated underscoring the massive lift it will encounter from a regulatory and legislative perspective.  Trump chimes in suggesting that FB may need a banking charter to move forward and be subject to all banking rules and regs and then France and the UK pitched in their two cents – none of it very supportive at the moment.  And not to be outdone – CNBC’s Shark Tank host Mark Cuban comes to the table saying – “No, no – not a good idea at all…..”  which only means that Mr. Wonderful – Kevin O’Leary can’t be far behind……unless the Winklevie twins have already hired him as a spokesman!

And Health care stocks surged on the news that the Trump administration is dropping its plans to curb drug rebates…..this after a federal judge blocked a separate effort to include list prices on the now very popular TV ads that drug companies take out.  Look – Sen Amy Klobuchar told us yesterday on ‘Morning Joe’ that there are 2 pharmaceutical industry lobbyists for every member of Congress and unless you go after the drug companies – Nothing is going to change in terms of costs and skyrocketing prices…..(just to be clear – I don’t watch Morning Joe – but I did see her interview on one of the news feeds)

Overnight – global mkts continue to surge….as the focus is on central bank easing……no matter that recent US macro data is stronger than expected – with yesterday’s stronger than expected inflation data complicating the narrative – just after Powell told us that inflation remains too low.  Now in Asia – both Singapore and China reported weaker data points – suggesting that the ongoing trade war is hitting them hard….so expect the global economy to begin to suffer – blah blah blah……and this morning – the IMF (Int’l Monetary Fund) is urging the ECB to stimulate the EU to ‘mitigate rising economic dangers’  that they see coming from BREXIT, Italy and the ongoing trade war. 

US futures are up – The Dow is advancing by 77 pts, the S&P is up 6, the Nasdaq is ahead by 15 and the Russell is up 3.  It now appears that the eco data doesn’t matter at all….And while Powell tells us that they are data dependent – the data is not pointing to an upcoming US recession at all.  Powell made it very clear – there is nothing between now and month end that will change his mind – which leaves us to wonder – A). Will it really make a difference to the economy? And B)> - If not – then why do it? 

So let’s talk earnings….and while the mkt expects earnings to be weak – and that the usual 75%+ of the reports will beat – the message will be – what are these CEO’s saying about the next 6 months.  Remember – in the end – its all about earnings and macro data that drive stocks and stock prices.  There is a disconnect between what the data is telling us and what investors are telling us – because investors are taking stock prices to levels that can’t be supported IF the global data is what they say it is………and therefore investors are reacting to the FED and the other central banks. Period.


Prosciutto Sorpresa (Surprise)

This is such an easy and wonderful appetizer for your next get together. It is Ricotta, Mascarpone and Grana Padano* cheeses mixed with crushed walnuts all rolled up in a slice of prosciutto…..Delish.

*Grana Padano is one of the most popular cheeses in all of Italy.  The name – Grana means grain – and this refers to the grainy texture of the cheese.  Padano refers to the region (the valley of Pianura Padana – in the northern part of Italy running from the western Alps to the Adriatic Sea). 

For this you need:  12 thin slices of Prosciutto di Parma, fresh ricotta, mascarpone and grana padano cheeses, crushed or chopped walnuts – you do not want to pulverize them, just rough chop or rough crush.

So – first crush your walnuts – set aside.

Now – take 1 cup of ricotta and add ½ cup of Mascarpone and ½ cup of grated Grana Padano cheese.  Fold in the walnuts and mix well.  Now – spread a layer of cheese on the prosciutto di parma and then roll it up.

Place on a wooden serving board and serve to your guests.  You can also include garlic crostini with fresh ricotta and honeycombs – if you never tried this – you don’t know what you are missing.

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Information and commentary provided by ButcherJoseph Asset Management, LLC (“BJAM”), are opinions and should not be construed as facts. The market commentary is for informational purposes only and should not be deemed as a solicitation to invest or increase investments in BJAM products or the products of BJAM affiliates. The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. There can be no guarantee that any of the described objectives can be achieved. BJAM does not undertake to advise you of any change in its opinions or the information contained in this report. Past performance is not a guarantee of future results. Information provided from third parties was obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness.

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Definitions and Indices

The S&P 500 Index is a stock market index based on the market capitalization of 500 leading companies publicly traded in the U.S. stock market, as determined by Standard & Poor’s.


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