Kiss It Goodbye
Kiss It Goodbye from King World News
On the heels of the recent turbulent trading in global markets, one of the greats today said you can kiss it goodbye.
Kiss It Goodbye
May 8 (King World News) – Here is a small portion of what Peter Boockvar wrote today as the world awaits the next round of monetary madness: It’s been talked about here and everywhere this year. What’s the message the stock market is sending in rocketing to record highs, outside of loving the Powell put kicking in. What’s the bond market saying with the sharp decline in bond yields, outside of responding to the Powell shift. I tried to reconcile by saying stocks are betting on a rebound in the global economy (with 40% of S&P 500 revenue sourced from overseas) in coming quarters while Treasury yields were focused on the current slowdown and being suspect of that recovery. I’ll say this that if we get higher tariffs this week and talks break down between the US and China, you can kiss that hoped for global economic rebound goodbye…
I’ve also said the behavior in semiconductor stocks, hitting an all time record high two weeks ago, and the 10 yr US Treasury yield down by 75 bps as of two weeks ago from the October level was a perfect encapsulation of the above differences of opinion. The former betting on a 2nd half recovery, the latter dealing with the here and now (see chart below).
Semiconductor Stocks Recently Hit All-Time Highs While 10-Year Treasury Yields Have Plunged
Well at least for the here and now, bonds have had it right. Yesterday IHS Markit revised its 2019 growth estimate for the global semiconductor market to a drop of 7.4% y/o/y in revenue. They said:
“After the chip industry attained a heady revenue expansion of 15% in 2018, many semiconductor suppliers in early 2019 remained optimistic that they could achieve modest growth this year. However, the chipmakers’ confidence quickly transformed into apprehension as they witnessed the depth and ferocity of the current downturn. The latest data indicates the semiconductor business now is destined for its worst year in a decade.” The underline is mine.