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The Macro Situation

physiocracy (noun)

• an 18th-century economic theory which held that the wealth of nations came from land agriculture and that the economy operated according to natural laws;

• the dark art of controlling economic growth by means of animal sacrifice.

― New Entry in the Updated Devil’s Dictionary

Someone must be sacrificing chickens. The U.S. economy is looking buoyant:

• Q3 GDP (2.8%) was less than forecast (3.1%) but still positive. An increase in imports has made a dent in production numbers.

• While consumer spending was strong, government spending was also a key factor, rising by 9.7% with a 14.9% surge in defense outlays.

• The Personal Consumption Expenditure (PCE) index dropped to 2.1% -- close to the target rate of 2%.

• The Core PCE (minus food and energy) held even for the third month in a row at 2.7%.

• Last week’s jobless claims fell to 216,000 compared to 227,000 the week before.

• While unemployment was steady at 4.1%, only 12,000 jobs were added in October (likely due to the hurricanes and Boeing strike).

• The private sector ADP report noted 223,000 jobs were added in October.

At the time of writing, the Fed Watch tool, which tracks the prices of various futures contracts related to interest rates (particularly the federal funds rate), estimates the chances of a rate cut in November are 98.9% for 25bps and 1.1% for no cut.

The Chicago Fed made an adjustment to the ANFCI. The new reading places conditions at a -.57, which is flat with the (newly adjusted) -.57 of last week. This level indicates that financial conditions are still loose.

Core Assets Update

Gold (2745.90) prices rose in expectation of jobs data. The rally was subsequently pushed back by a strong US dollar (104.32).

• Watch: GLD, GDX, NEM

Crude Oil (69.33) prices remain dampened as the Chinese stimulus was offset by easing tensions in the Middle East.

• Watch: USO, VAL, XOM, RIG

The 10-year Treasury yield (4.386%) reached its highest since July as bond traders appeared to remain unperturbed about the strength of the US economy after the Friday jobs report.

• Watch: TLT, EDV, IEF

― Todd Mei, PhD and Sebastian Purcell, PhD

AI Sentiment Report

The following sentiment scores use AI to track sectors as leading indicators. (Lesson 4 of The Art of The Bubble covers the selection of lead indicators for bubble trades). The scores are most indicative for the next day of trading (a Monday), but they appear to set the general tone for the next week.

― The Research Team:

Dom Viera, Samantha Russell, Nicole Zinuhova, Michelle Milan

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Benchmarks and Data Sources

All data not otherwise specified (or obvious from context) is taken from TradingView.com.

The cryptocurrency benchmark used is an equally weighted mix of BTC and ETH. While the benchmark for stocks used is the Nasdaq 100.

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