Jeff Bezos just met with President Trump for over an hour.  Time to load up on AMZN?

As everyone marvels at the performance of the U.S. stock market, just remember that in CAD, Aussie Dollar and Yen terms, the S&P 500 is barely up more than 1% for the year; flat against the Kiwi and Sterling; and down 3% in peso terms, down 5% in euro terms and down 6% in Swedish krona terms. Oh, and down 20% in gold terms. I hate to rain on the parade, but I think I just did.  The illusion of a bull market through the lens of an ever depreciating DXY, which just broke below 98 after failing once again at the 50-day trendline.

If anyone hears of Tim Cook scheduling a meeting at the Oval Office, I would suggest loading up on AAPL right away.

There was a time when a +0.2% print on the Powell ‘super core’ inflation measure would have ignited a bond rally.  Obviously not today, even though this metric has slowed to a mere +1.1% annual rate from January to June.  All the market sees is the tariff effect starting to percolate through the goods sector – and more is to come. The question is the extent to which the moderation on the services front can continue to be relied on to provide an antidote - but the Fed clearly isn’t going to be taking any chances, and the swaps curve is in the process of pricing out the prospect of seeing anything more than one rate cut by year-end.  Given the flatness in the yield curve from overnight to 10-year notes, it will require a real break in the economic data to get the bond market to rally into an inverted state – a conundrum for those of us who have been long duration.

The long bond yield just tested the 5% mark yet again. Over the past two decades this has proven to be a firm ceiling and a very juicy entry point.

Today’s market rally is a testament to the veracity of the TACO trade. But what if Trump isn’t joking around this time?

From TACO to TWIST: Trump Will Impose Severe Tariffs!

This is a no-firing, no-hiring labor market on our hands. In other words, sclerotic. Jekyll and Hyde. Initial jobless claims at 235k show that businesses are far from embarking on a layoff cycle. But the fact that the mountain of continuing claims has reached a fresh 44-month high of 1.965 million also shows that the swelling ranks of the unemployed are not finding a job. The problem with a complete lack of hiring activity is that if we ever do see layoffs commence, nonfarm payrolls will begin to contract, and the recession that investors attach 0% odds to ends up become a shocking reality.

A June jobs report that is consistent with negative prints for real wages and industrial production is deemed by the masses and the markets to be solid. Adjust for the decline in the workweek and the Birth-Death model skew, and guess what? Private sector payrolls sank -400k last month. Let’s hope the Fed finds the time to scratch the surface, just a little. This was a weak report, my friends!

We just received the updated monthly GDP data from S&P Global. Real economic activity contracted -0.7% MoM in May and has now been flat or down in five of the past six months. Yet, Jay Powell refers to this as “solid” and investors seem to believe him (like they did with Ben Bernanke in 2008). Over the six months to May, real GDP has shrunk modestly (as the Beige Book told us a few weeks back), by a -0.7% annualized rate. The three-month trend is -0.1% at an annual pace. Over the past four decades, only in June 2022, August 2012, June 2011, and January 2011 was the economy NOT in an official recession with both the three- and six-month trend below the zero line. In other words, the odds that we are, in fact, in a recession right at this very moment are over 90%. Ed Yardeni told CNBC last Friday that the economy has become recession-proof, but that is not being supported by the data. As for the stock market, he may well be onto something: we have either reached a bizarre state where the economy no longer matters to the S&P 500 or a case where denial is winning out over reason.