October 16, 2019

The market is trading in line with our outlook. With 20 months of a sideways market, we believe there will be a nice breakout in the 4th quarter that should spill over into 2020. The longer the sideways market lasts, the more cash build up there is on the sidelines, which should lead to a nice sustainable rally. The HCM BuyLine® is positive and tracking the market quite well.

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The weaker-than-expected ISM manufacturing and non-manufacturing reports, along with slower job growth, caused 10-year Treasury yields to fall around 20 basis points (or 0.2%). Short-term yields fell to new closing lows, while long-term yields did not. The weakness was enough to cement expectations for another Federal rate cut at the month-end.

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The world’s leading central banks are beginning to rethink their approaches to monetary policy. The European Central Bank (ECB) and the Bank of Japan (BOJ) could be coming to an end with their easing policies. As a result, the developed worlds’ yield curves, as measured by the spread of the 10-year and 2-year, have converged in a range of 10-20 basis points (or 0.1-0.2%). Thus, the global bond rally may be nearing its end. If so, the stock/bond ratios can only move lower if stocks do.

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  • The Cass Freight Shipments Index ticked up 0.8% in September, but it fell 3.4% from a year ago, in negative territory for the tenth straight month, as demand weakened across most modes of transportation.
  • This weighed on spot pricing for transportation services, especially trucking.
  • As a result, the Expenditures Index was down 4.5% from a year ago, the most since August 2016.
  • This report shows that the physical movement of goods has slowed and supports the argument that economic activity is decelerating.



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