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The Weekly Track hurricane-season

- The Weekly Track – Hurricane Season by Bob Savage
http://track.com/articles/the-weekly-track-hurricane-season/

School is back in session. The harsh lesson for traders Friday September 1 was that weak data isn’t always what it seems as the US non-farm payroll disappointed but bond yields rose and the USD rallied despite the news – with the ECB talking about no QE tapering talk until December, with the US ISM at 6 year highs, with the hope of a political consensus over the debt ceiling, tax reform and infrastructure rising because of the damage from Hurricane Harvey. The winner last week was gasoline up 28.5% to 2-year highs – as up to 1/3 of the US refinery capacity has been shut. Oil was a modest loser but only WTI, not Brent. Coming in second, heating oil / jet fuel up 8.3% on the week – which maybe more important as airlines are likely to pass-on those costs to the consumer and so with it the CPI which adds to the fear that the FOMC maybe more inclined to hike in December than the 14% chance that priced after the jobs report. The higher CPI, the growth from fiscal stim
ulus and the ongoing tightening of labor markets all drive the need to act sooner rather than later making this week’s cacophony of central bank rate decisions and speeches all that much more exciting. We live in uncertain times and the lack of summer reaction to geopolitical fears whether its North Korea, which had its 6th nuclear test this weekend, or the rising trade concerns over NAFTA talks or the ongoing trade concerns over the US/China or the elections in Germany, Norway and New Zealand this month - all of this highlights outside shock risk to the summer trends, where benign bonds, higher metals, weaker USD, stronger equities all could reverse as volumes and investors push for safe-havens. Markets have found some uncertainty in the future forecasts but they don’t trust any predictions and they seem prepared for buying every dip still until something bigger washes them away. The concept of a stall speed for the US economy has long passed – that died in 2011 and
has proved false since 2009 with 2% being the 4% for normal GDP. Perhaps the next focus will be on Irma and outside shocks. Its hurricane season and summer is over.