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Things you need to know.

  • Trump hints at more tax     cuts and retreat from Tariffs for the season
  • Trump continues to     hammer Powell
  • Rosengren not a     supporter of lower rates – what about the others
  • Mkts have rallied back –     but will they hit resistance here?


So stocks rallied hard again on Monday taking the Dow up 250 pts or +0.96%, the S&P up 35 pts or 1.21%, the Nasdaq gained 106 pts or 1.35% and th3e Russell added 15 pts or 1.02% – as investors/trader’s and algos all jumped on the train… we can thank Wilby Ross and the German Finance Minister – Olaf Scholz for that.     Word was  that commerce secretary Wilby Ross announced a delay in the restrictions imposed upon Huawei Technologies and this was meant to be seen as an olive branch – a way to save face for both sides and allow for the next set of conversations to take place next month – And then over the weekend the German finance minister hinted that they are going to find some $55 bil and put it towards a large scale fiscal stimulus package – this after we saw some disappointing data coming out of the EZ and Germany. 

 Recall –  Donny slammed the trade talks when he announced the imposition of new tariffs earlier this month.   Mkts have been in a tailspin since that announcement  – losing some 7% by August 5th only to rally back when it became clear that it would be the FED to the rescue only to get slammed hard again when the yield curve inverted for all of 5 mins – sending the pundits to predict the ‘end of the world’ as they called for the start of a recession some 15 months out!   And then in the middle of all that – we got negative macro data out of China and then Europe which caused that flight to safety and we saw money move into US Treasuries, Gold, Utility Stocks, Reits and what some are now saying is a safe haven – Bitcoin (I am not saying that at all and I think that saying SAFE and BITCOIN in the same sentence is extremely misleading and incorrect). 

 Once the yield curve corrected itself and cooler heads prevailed  – the bulls came charging – talk of that recession quickly faded as those same pundits suddenly did an about face – confirming that the ‘inversion’ may not have been significant enough to warrant the panic created by the algo’s on Wednesday… between Thursday, last week and yesterday – the mkt represented by the S&P rallied by 4.2% leaving us right at the 2925 ish level…a level that I believe will prove highly resistant. 

 Now a couple of things here…..1.  Huawei while happy at the latest news is still bruised and hurting after having been treated so badly by the administration…..saying that the ‘temporary relief doesn’t change the fact that its been treated unjustly’… is this over?  Hardly!  Next up – is the ongoing drama over global interest rates  – and US treasury rates…..where are they going?  Will the Fed cut rates to near zero?  Will 10 yr treasuries go to zero?    And if they do – what does mean for stocks?  Well that depends on why you think treasuries will go to zero…is it because there is global concern over the state of the economies  and US treasuries represent the safe haven as US investors get out of stocks and into bonds– which is one view – OR is it because global investors are searching for yield (which also happens to be SAFE) as they diversify –   so they pile into US treasuries and US stocks – and that is the other view……. Can you have plunging yields – which means rising bond prices –  and rising stock prices?   Apparently yes….and with all the talk of global rates going even lower – we can expect that US treasuries can continue trade higher and if the US continues to outperform – we can also expect stocks to move up.   But again – that does not mean just buy everything….not at all – Do your homework. 

 Now late yesterday – word leaked out that the administration is considering more tax cuts (specifically payroll – although Kudlow disputed that)  along with the possible retreat in some of the existing tariffs – so that the economy gets another boost – remember – we are in the election cycle – we have 15 months to go before voters take to the polls…..the last thing Trump needs is for the economy to go off the rails and while his trade policy is not helping and appears to be nowhere near settlement – he and his advisors now realize that they must do something else to insure continued outperformance.   With constant calls on the FED to cut rates and re-instate QE (quantitative easing measures)  – Trump will circumvent Jay Powell and find other ways to ease what some suspect will be tougher days ahead. 

 That being said – it is what it is…..and the mkts will respond.  This morning – European mkts are mixed but mostly a bit lower – US futures are also a bit lower  this morning as the rally over the past 3 days has taken us right back to the 2925/2950 level…a level that I think will find plenty of sellers….. Now – anything can happen – the administration can introduce all kinds of stimulus – lower taxes, fiscal spending, etc….to keep this going….and the FED is expected to continue to cut rates in September – which will put a floor under stock prices  – although Eric Rosengren – Boston’s FED President is not so sure he is a go along voice.  He is not in the camp of lower rates just yet and is concerned that lower rates will destabilize not only the financial sector but the US economy.   He was one of the two central bankers that did NOT support the July rate cut.   

 It is a big week for retail…and we are starting to see the impact of tariffs and will see more as the week goes along.  I suspect that the discount retailers will do well while the high end ones will suffer a bit – but let’s see how this plays out.  There are not eco reports today.   Sentiment towards the trade war has been improving – Trump and his administration appear increasingly concerned about the impact of tariffs on the U.S. economy and the holiday shopping season and so any talk of improvements in trade or  a retreat in tariffs will help stocks.  .

We have two Fed officials scheduled to speak before Powell’s Jackson Hole speech on Friday: Mary Daly  at 4:30 p.m. ET and Randy Quarles 6:00 p.m. ET – since both are after the bell – there can only be speculation about what they will say…..if both have a similar tone to Rosengren – which was “less dovish”  – that could weigh on stocks in the afterhours session.  Some people expect  Powell to deliver a dovish policy statement about the US economy on Friday ( I do not) – The topic for the conference is “Challenges for Monetary Policy”  it is NOT “What’s Next for the US Central Bank”  .  Now if these two echo Rosengren then you can be sure that he won’t go anywhere near it. 

 Take good care.


 Eggplant Caponata –

 This is a Sicilian version of the French Ratatouille that I featured last week – but this is a great dish and is used mostly as an appetizer – some people use it as a side dish or even toss it over pasta – but I only remember the way my grandmother made and served it – and that was in a bowl at room temp with freshly sliced warmed Filoncino  (FEE – LON – CHINO) the Italian version of the French baguette. 

 For this you need:  1 lg eggplant with some of the purple skin removed, olive oil, chopped celery, chopped Vidalia onion,  sliced red pepper,  smashed/chopped garlic, 1 can of plum tomatoes- hand crushed, Green olives (pitted) and rough chopped, capers (drained/not rinsed), 1 tlbs of tomato paste, some oregano, s&p to taste.  (optional ½ cup of yellow raisins).  

 You will also need ½ c of red wine vinegar, 2 tblsp of water  and 2 tblsps of white sugar.

 Begin by cutting the eggplant into bite sized cubes – place in a colander and sprinkle with salt – let it drain for 30 mins.   Next – heat up a large skillet with olive oil – add the eggplant and stir well – turning them so that they cook evenly on al sides…now the eggplant sucks up the oil – so you may have to add a bit more as you cook the eggplants…..go ahead, but don’t drown it.  Remove the eggplant and place in a clean plate and set aside. 

 Now add the onions red peppers and sauté until soft (If you need more oil – go ahead)  – maybe 8 – 10 mins….remove and place on a seperate plate.  Now sauté the celery – and cook until a bit soft. (again if you need a bit more oil – go ahead).  Now combine the celery, onions and peppers – stir in the chopped green olives and the capers.  Taste and season with s&p and oregano.   Now add the hand crushed plum tomatoes and the tomato paste.  Allow it all to blend – as you cook over med high heat.  Careful not to let it burn.  Re-introduce the eggplant and allow all of the veggies to simmer.  (Here is also where you would add the raisins if you use them). 

 In a separate pan – add the vinegar, water and sugar and bring to a boil and allow the sugar to dissolve.  Once dissolved take it off the heat.  Add this mixture to the skillet with all the veggies.  Allow it to all blend. Remove from the heat and allow to cool.  Can be eaten warm (not hot) , at room temp or even cold from the fridge.  My preference is room temp – not hot nor cold, just right.  Serve it with the warmed sliced Italian bread.