Last week I suggested that the market might be ready for some real news—corporate earnings. That is still a key topic, but attention is focused on world events. Pundits will be asking:

How Should Investors Respond to Geopolitical Risks?

Last Week

Last week the economic news was good, but mostly ignored.

Theme Recap

In my last WTWA I predicted that attention would shift to corporate earnings reports. Little did I know that a passenger dragged from a United Airlines flight would dominate the news cycle for the week. Just as that was losing interest, the Trump military actions grabbed the spotlight. So much for my expectation (and hope) of returning to news focused on financial markets.

The Story in One Chart

I always start my personal review of the week by looking at this great chart from Doug Short via Jill Mislinski. She notes the small daily moves and the 1.13% loss for the week.

Doug has a special knack for pulling together all the relevant information. His charts save more than a thousand words! Read his entire post for several more charts providing long-term perspective, including the size and frequency of drawdowns.

The News

Each week I break down events into good and bad. Often there is an “ugly” and on rare occasion something very positive. My working definition of “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too.

There was not much economic news last week, but it was pretty good. 

The Good

  • Port Traffic showed strength in March. Steven Hansen (GEI) helps us sort through a very noisy data series.
  • Foreclosures are down, now below pre-recession levels. (MarketWatch).
  • Mortgage delinquencies are at a 10-year low. (24/7).
  • Small business optimism registered a strong 104.8.
  • Inflation tame. PPI and CPI both declined. Some see this as negative news since it is not hitting the Fed’s target. That makes little sense. If the Fed can continue stimulative policy without increasing inflation, so much the better.
  • Weekly jobless claims remained low at 234K. This half of the picture remains solid. We also need new hires.
  • Michigan sentiment remained strong at 98. The best chart of this indicator is the Doug Short design, now updated by Jill Mislinski. It shows the indicator, recession periods, and GDP. You can easily see the current level versus past records. If only everyone was so clear!

    • The Bad

  • Retail spending declined 0.2%. (Calculated Risk reports). Steven Hansen has a different take, with multiple historical charts and comparisons. Retail sales are an important sector, so this is worth watching closely.

    • The Ugly

    Fraudulent LIBOR trading went far beyond those on the front line. This story should have gotten more attention because so many swaps and variable interest rates (perhaps your own mortgage?) were linked to this rate. Perhaps that is not a good idea.

    The Silver Bullet

    I occasionally give the Silver Bullet award to someone who takes up an unpopular or thankless cause, doing the real work to demonstrate the facts. No award this week, but nominations are always welcome. There are many bogus claims and charts out there!

    I am disappointed that so many of my blogging colleagues agree with this concept – on a theoretical basis – but do not join me in highlighting these posts. While I do not compete for my own award, I had a post this week that illustrates what I am looking for. There are plenty of “mystery charts” that are unclear, poorly sourced, or cannot be replicated. Sadly, these optical illusions fool many readers.

    The Week Ahead

    We would all like to know the direction of the market in advance. Good luck with that. Second best is planning what to look for and how to react. That is the purpose of considering possible themes for the week ahead. You can make your own predictions in the comments.

    The Calendar

    We have a normal week for economic data.

    The “A” List

  • Housing starts and building permits (M). An advance look at an important sector.
  • Leading indicators (Th). Last month won’t be matched but overall strength expected.
  • Existing home sales (F). Less important for immediate economic effects, but a good market read.
  • Beige book (W). Anecdotal data, but the punditry hungers for any Fed-related news.
  • Initial jobless claims (Th). Is the series edging up from record low levels?
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