On the macro front, CNBC reported that the two-year Treasury yield hit the “highest level since 2008 after Fed signals no change in rate hike plans”, pushing the world closer to the danger zone…
(Source Fred)
… the DJTA [Dow Jones Transportation Average] continues to lag the DJIA [Dow Jones Industrial Average], offering a of long/short convergence trade, if you are a fan of the T&L sector.
(Source Yahoo Finance)
So, do these signs indicate that worse things to come?
A serial investor, who is closely monitoring the T&L industry and looking to reduce his exposure, told me:
“Trump’s trade policy will end in tears. I’m thinking I might sell all my equity holdings after the coming autumn rally and live off the accumulated capital gains for a few years. I don’t trust the markets with Trump calling the shots. I think 2019 will be a really punk year.”
Today, Zero Hedge reported: “With Q3 earnings season winding down, it is safe to say that even though Q3 earnings came in sold, rising about 26% Y/Y, they are providing little support for the market. Companies that beat on both EPS and sales have seen scant rewards, while companies that missed have been viciously punished.
“The reason for this is Wall Street’s growing obsession with “peak earnings” which, in a time of stable revenues, means rising concerns about profit margins. Not surprisingly, Goldman’s chief equity strategist David Kostin dedicated his last Weekly Kickstart note to what companies laid out as the three main sources of margin pressure going into 2019, which were as follows: (1) increased tariff rates, (2) a tight labor market, and (3) rising debt costs.”