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A Bird's Eye View Blog

Fireside Charts: Trade War & BREXIT Headlines Spark Currency Action, and More Fed Intervention is on the Way

By:BCM Investment Team | Date:Dec13, 2019 | Category: Equity, Economics, Market Highlights, Fireside Charts

While the superstitious among us may have been braced for bad news today (happy Friday the 13th!) the headlines—and market reactions—were largely positive. Two major drags on economic outlook, the trade war and BREXIT, both made progress yesterday as the U.S. and China struck an "interim" trade deal and Prime Minister Boris Johnson’s Tory Party won the U.K.'s general election, allaying fears of a "no-deal" BREXIT. The Nasdaq and S&P 500 hit record-high closes in reaction, and currencies also reacted strongly—but not necessarily in the USD's favor. The greenback's been dominating for some time now, but a look at the charts shows it could be poised for a turn. Should we be keeping our eyes on commodities and international stocks? Meanwhile, the Fed announced Wednesday that it will continue its repo market intervention to the price tag of half-a-trillion+ through the end of the year. Someone must have made the nice list this holiday season...


1. It was a good night for dimming global political uncertainty: A U.S.-China trade deal and the U.K. elections appear to pave the way for a BREXIT with a negotiated deal with the EU.


u.k. general election results

Source: BBC, from 12/12/19



2. The new tentative trade agreement with China has currency provisions which has the Yuan up and the USD down...


usd vs. yuan

Source: WSJ Daily Shot, from 12/13/19



3. This is also putting pressure on the USD as the pound soars...


usd vs. pound

Source: WSJ Daily Shot, from 12/13/19



4. EM currencies are also rallying...


em currencies rally

Source: WSJ Daily Shot, from 12/13/19



5. Will the two deals cause the USD to go into a sustained downtrend? If so, it should provide a long overdue tailwind for commodities and international stocks...


bloomberg dollar spot index

Source: WSJ Daily Shot, from 12/13/19



6. The tentative trade deal contains provisions for more Chinese agriculture purchases. Will it be enough to offset the U.S. farmer's pain?


bloomberg grains index

Source: WSJ Daily Shot, from 12/13/19



7. And barely a peep out of the financial press... QE is back thanks to the Repo market...


Fed balance sheet

Source: FRED, from 12/13/19



8. ...and more is on the way!


Fed repo market financing

Source: FRED, from 12/13/19 and the Financial Times, from 12/12/19



9. Are the realities of student loan debt and the value proposition of an undergraduate degree finally catching up to colleges and universities?


tuition inflation

Source: WSJ Daily Shot, from 12/12/19



10. Where do you see opportunity?


PE by region

Source: J.P. Morgan, from 12/12/19





The market's closed and we made it through Friday the 13th unscathed, but arming yourself with information can never hurt. Check out our infographic on "The Anatomy of a Bear Market" to learn the signs of an approaching bear!


The Anatomy of a Bear Market 










Disclosure: The charts and info-graphics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are a recommendation to take any action. Individual securities mentioned may be held in client accounts.