A Fed official stated yesterday an interest rate hike in June is indeed plausible. The markets are suggesting the odds of such are about the same as that proverbial snowball down under.
Equites initially sold off by steep double digits fearing slowing global growth, perhaps the inverse of the comment made by the Fed official. Treasuries rallied and the dollar rallied off of 15 month lows. Value continued to outperform momentum growth, the result of domestic growth is stronger than global growth.
A nascent narrative is that many money managers/hedge funds/etc. are trend followers not setters, an argument that can be easily supported by the proliferation of ETFs and HFTs that employ similar strategies. Some hedge fund luminaries have stated there is no forward looking thinking or geopolitical or macro-economic analysis.
I can argue the above sentiment is the result of the lack of returns outside of the largest mega capitalized momentum growth issues. If domestic growth continues to outperform international growth, I believe value will continue to rally for such is not overly dependent upon global revenues for earnings growth. Approximately 50% of the S & P 500 revenues and 55% of its profits are generated via international trade. The value candidates are almost entirely dependent upon domestic sales for revenue and profit growth.
Today the ADP Employment Private Employment Survey is posted. What will this tier I statistic suggest? Will it support the narrative US growth is exceeding all other regions/countries? As written many times, the ADP data offers guidance for Friday’s BLS Labor report.
Analysts are expecting a 195,000 increase in private sector jobs.
Last night the foreign markets were down. London was down 1.26%, Paris down 0.72% and Frankfurt down 0.76%. China was down 0.05%, Japan closed for a holiday and Hang Sang down 0.73%.
The Dow should open moderately lower on economic and profit concerns. Oil is nominally higher. The 10-year is unchanged at 1.80%.
