“Alright! One, two, three, four…”
-Chris Parnell on Saturday Night Live

After going Triple Dovish, oh yeah, bring it! Don’t Fear The Reaper! The Old Wall wants more cowbell! 

Can’t you see the next gen Fed ensemble with Chris Parnell jamming his guitar and Will Ferrell joined by Steve Moore banging that ole cowbell? You know who Steve Moore is, eh? 

Oh no, not Steve Moore the musician or the hockey player. No, no, no – this is Steve Moore the “conservative” markets and economics writer that Trump is nominating for the Federal Reserve! 

Back to the Global Macro Grind… 

I’ve been on TV plenty of times with Steve Moore. He’s a nice guy. He, like his buddy Larry Kudlow, used to be a big “King Dollar” guy. Now I guess they’re both just willing to forget everything they ever wrote and/or said about that. 

Why? That’s simple. The guy they’ll do anything to work for wants a weak US Dollar and lower interest rates. 

So, enter Steve Moore’s Fed nomination, with a “50 basis point rate cut” on the table… and sovereign bond yields are getting smoked to lower-lows, partly on that, this morning: 

  1. UST 10yr Yield down another -5 basis points to 2.36%
  2. German 10yr Yield down another -3 basis points to NEGATIVE -0.05%
  3. Swiss 10yr Yield down another -2 basis points to NEGATIVE -0.45% 

Meanwhile, on the other side of the central market planning pond, Mario “Whatever It Takes” Draghi is saying that while the European economy continues to be weaker than he expected, he wants to “reflect” on negative interest rates. 

Uh, this isn’t a time to “reflect”, brother. It’s a time to bring it and ring it! 

So far, the Global Currency market is a little dazed and confused by all of this. With the BOJ, ECB, and PBOC already ringing the cowbells as loud as they have, collectively, in years… it’s hard to tell who is independently the loudest… 

Essentially this competitive devaluation brings us back to the Currency War. Remember that? It never actually went away. It, like the Fed, just goes on “pause” for periods of pro-cyclical-time (i.e. when growth is NOT slowing). 

And the deeper the sound of it all… “One, two, three, four…” 

The deeper the realization by market participants that these central banks are actually acting in line with the rate of change of economic gravity #slowing... 

“Uh, are you sure that was sounding okay?”
-Chris Parnell 

“I'll be honest.. fellas, it was sounding great. But.. I could've used a little more cowbell. So.. let's take it again.”
-Christopher Walken 

If you haven’t seen the Saturday Night Live More Cowbell skit, no worries. 

Steve Mooore #Cowbell is what you’re gonna get. And, as crazy as he might sound to a #StrongDollar conservative this morning, he’ll have plenty of conservative and liberal crazies joining him. 

The easiest (Low Beta, Low Vol) way to get paid on this was an asset allocation decision you should have been making for the past 6 months: BUY TREASURIES (across the curve). 

With the 2yr UST Yield getting cowbelled to 2.21% this morning, that puppy can drop another 50-75 basis points (from here) if Trump gets the Fed singing his favorite late-night show’s tune. 

If and when the Fed starts doing what the market is already pricing in (58% chance of a rate cut in 2019), you know what the Yield Curve is probably going to do on that? Steepen. 

Maybe the next gen Fed band will get right cocked together (Powell plays the guitar) with the new guy over at the Supreme Court (he likes beer) and start calling Moore, Steepening Stevo. Wouldn’t that be a hoot? 

Unfortunately for Americans who don’t own things like Oil Futures, Gold, REITS, and Utilities (XLU made yet another ALL-TIME high yesterday btw), they’ll be stuck with the Old Wall Journal writer turned Trumpeter’s tab. 

Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND signals in brackets) are now: 

UST 10yr Yield 2.36-2.59% (bearish)
UST 2yr Yield 2.19-2.42% (bearish)
SPX 2 (bullish)
RUT 1 (bearish)
NASDAQ 7 (bullish)
Utilities (XLU) 56.99-59.39 (bullish)
REITS (VNQ) 84.60-87.38 (bullish)
Energy (XLE) 64.60-67.63 (bullish)
Financials (XLF) 24.91-26.11 (bearish)
USD 95.08-96.75 (neutral)
EUR/USD 1.11-1.14 (bearish)
Oil (WTI) 57.46-60.59 (bullish)
Gold 1 (bullish) 

Best of luck out there today,

KM

Keith R. McCullough
Chief Executive Officer

Mooore #Cowbell! - Chart of the Day