Risk May Have Been Off But Gold And Oil Were Surely ON

Today we experienced classic risk-off market movements.

Gold and the rest of the precious metals complex led the parade out of equities. At 3PM in New York, gold is up nearly $18 or 1.45%. Silver performed even more strongly, rising 1.70%. Platinum and palladium were the best percentage performers, up 2.00% and 1.8% respectively.

The U.S. 10-year bond yield was lower and the face price higher, an indication of a bit of migration to paper, although we think that gold’s attractiveness kept bond yields fairly static.

Another indication of today’s risk-off sentiment was the 3.00% jump in the yen against the U.S. dollar. Not all of that was from haven bets. About half of the upward jump of the yen was due to a Bank of Japan statement that said it would retain negative interest rates because of the sluggish Japanese economy.

The big fundamental news of the day concerned the U.S. economy.

The big behemoth grew only 0.5% on an annualized basis in the first quarter of 2016. We hate to sound like conspiracy theorists, but something in the stats is being overlooked or some data is uncollected.

We can’t be adding nearly 3 million jobs per year yet have an economic growth of 0.5% on a yearly basis. Either the employment numbers are off or the growth records are off.

However, the low growth rate is consistent with the assessment made by the Federal Reserve yesterday after the latest FOMC meeting:

…The federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

Well, 0.5% growth should set off alarm bells and convince the Fed to keep their little hands off rates unless it is to turn them lower once more.

We are still of the school that believes the legislative branch of the federal government needs to step up and initiate some sort of spending program – infrastructure, education, new rail stations and airports, etc.

Before closing, we have to note Apple rocky ride. It is a market-defining stock, and a kind of psychological bellwether for the American or even whole world’s economy.

In reality, it’s not that big of a component in strictly material terms. But, as Apple goes, so go equities for now.

Crude is going to snatch that crown back in the middle term. West Texas Intermediate is up 1.50% today in afternoon trading. We think, however, that it is going to test it recent top (November of 2016).

While technically oil and gold are looking great, there is a boatload of room for the pricing of equities to move up. Once the reappraisal phase of the post-FOMC and post-earning season overtakes current markets’ momentum we will see some shifting of financial resources.

Wishing you as always, good trading,