July Key Takeaways

Stock Indices

  1. Emerging markets dominated stock returns in July with Turkey leading the way.
  2. India, which we stated was one our favorites at the beginning of the month continues to rip,  up over 22 percent, YTD.   This is going to be a spectacular bull market.   Everything lined up – demographics,  lots of inefficiencies to be improved,  much room for policy improvement.
  3. The S&P500 continues to defy seasonality and move higher.   We expect a correction in October as many stock negative forces will be converging by then.
  4. The German DAX hit by stronger euro currency.

 

Month_Stocks

Local Currency Fixed-Income

  1. Brazil 10-year rates continue to move lower,  now down about 140 bps on the year.
  2. U.S. 10-year flat.
  3. Indonesia and Canada rates moving higher with oil prices.
  4. Little change in U.S. yield curve.

 

Month_Fixed Income

Currencies

  1.  Dollar weak on the month, with index approaching key and critical support at 92.  It is very over sold and non-commercial longest euro position since 2011, just months before the Eurozone almost melted down.   We think it bounces here but keep it on a tight leash.   Dollar slumping with Trump and with the Genaral taking charge of White House,  confidence may be somewhat restored.   Nevertheless, plan on gettting short on a close below 92.
  2. Aussie, commodity currencies,  and Euro ripping higher.
  3. Global capital flows like 10 plus 10-year interest rate in Brazil, moving currency higher.
  4. Super Mario may be getting concerned about higher Euro.  Look for some talk down.

 

Month_FX

Other Risk Indicators

  1. Reflation trades picking up with weaker dollar
  2. Iron ore up big on the month.  We posted it looked like it bottomed last month.  A sign “old China” is reaccelerating.
  3. Ags, mainly wheat, giving some gains back.
  4. Energy stocks lagging the commodity higher
  5. We may be talking about higher cyclical inflation in the fall as markets and analysts continue to obsess over deflation.  Blah, blah, blah!

 

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