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The 3 ‘T’s: Full Week Ahead Preview

In essence, the same things everyone was watching last week (e.g. tech, trade, Trump) will be in focus again...

Well clearly, Donald Trump has set everyone up for another wild week, although it’s always possible everyone chooses to ignore him pending confirmation that he’s actually planning on going through with what he implicitly and explicitly threatened to do over the weekend.

In case you missed it (which is impossible, but let’s pretend you managed to tune him out over the past 48 hours), Trump did the following on Saturday and Sunday:

  1. accused Jeff Bezos of defrauding the post office and, by extension, “scamming” America
  2. demanded the Washington Post register as a lobbyist
  3. warned that “caravans” of migrants are preparing to invade from the south
  4. appeared to rule out a deal on DACA
  5. threatened to “stop Mexico’s cash flow” by canceling NAFTA
  6. shrieked “HAPPY EASTER!” at everyone

So again, that sets the stage for God only knows what for Amazon this week and it exacerbates an already tense situation on trade by underscoring the notion that Washington cannot be relied upon to negotiate because America is being led by someone who spends Easter Sunday screaming at Mexico on Twitter.


Amazon has fallen 3% or more for two consecutive weeks, so we’ll see if Trump’s tweets are enough to dissuade any potential dip buyers:


At some point it’s going to be imperative that anyone who is managing money and simultaneously clinging to the idea that there’s some “plan” or “strategy” or whatever else behind Trump’s actions give up on that notion. I realize it’s difficult for a lot of people to come to terms with the idea that everything they’ve been saying to pseudo-rationalize this presidency is dead wrong, but it’s time to throw in the towel. He’s a moron. That’s just all there is to it. He spent Easter weekend accusing Jeff Bezos of conspiring against the post office and then tried to unilaterally cancel NAFTA based on a Fox & Friends segment he saw about migrant caravans. Somewhere in there he complained to Don King about porn stars and had dinner with Sean Hannity.

So if you want to go ahead and keep insisting there’s a method to this madness well then be my guest, but there’s not. I’m really sorry, but there’s just not.

As mentioned earlier on Sunday, we’ll get March payrolls this week and as usual, this will be seen as a referendum on the viability of “Goldilocks.” What you want is a headline beat and a miss on AHE – in other words, you want exactly what we got in the February report. The disaster scenario is a headline miss and an AHE beat following a down week for risk assets. Here’s a quick preview from Goldman:

Nonfarm payroll: GS +200k, consensus +189k, last +313k. We estimate nonfarm payrolls increased 200k in March following a 313k gain in February. Our forecast reflects strong labor market fundamentals partially offset by a sizeable drag from weather, as snowfall was above-average in the first half of March. If realized, our forecast would represent a significant acceleration in underlying job growth from the 180k trend in the second half of 2017. We estimate the unemployment rate declined by one tenth to 4.0% (from 4.14% previously), as continuing claims resumed their downtrend between the survey reference periods. Additionally, surges in labor force participation as large as that seen last month (+0.3pp) are typically associated with a subsequent decline in the jobless rate. Finally, we expect average hourly earnings to increase 0.3% month over month and 2.7% year over year, reflecting somewhat favorable calendar effects.

And here’s BNP:

The March employment report highlights US data next week. The February report showed an outsized 313,000 jobs added for the month, with particularly strong hiring in retail, manufacturing, and construction, in addition to a 54,000-job upward revision to the previous two months. However, a 0.3pp rise in the labour force participation rate held the unemployment rate steady at 4.1%, while average hourly earnings growth slowed to 0.1% m/m after averaging 0.3% m/m the prior three months. For March, we expect 170,000 jobs to have been added, driven by relative slowdowns in the above sectors and the month of March having a historical record of underperforming trend. Despite a softer anticipated number of jobs added, we project the unemployment rate to decline 0.2pp to 3.9%, on account of our expectations for a decline in the participation rate. Since about 2014, the participation rate has remained relatively bounded between 62.7% and 63.0%. We interpreted last month’s bounce to 63.0% as largely noise, and expect it to follow past behaviour and tick back down in March. On the wages front, we expect a moderate rebound in average hourly wage growth to 0.2% m/m, which should bump the year-on-year rate 0.1pp to 2.7%. We continue to expect a steady pickup in wage growth to leave average hourly earnings up 3.1% by year-end.

Barclays is at 200k, 4.0% on the unemployment rate and 2.8% y/y on AHE, for whatever that’s worth.

On the global growth front, this was decent news over the weekend:

As Bloomberg notes, “industrial activity is helping the world’s biggest exporter power through the uncertainty from Trump’s announcing fresh tariffs on $50 billion of Chinese imports and Beijing’s own retaliation against levies on metals.” So basically, we’re all looking to China for help in propping up a global economy that Trump is doing his best to try and crash.

Speaking of China and trade, changes to tariff treatments announced in response to Trump’s metal levies go into effect on Monday.

There’s no shortage of econ this week in addition to U.S. payrolls. There are PMIs galore, flash HICP in Europe, and the March Tankan survey in Japan.

I guess one thing I would note about this week is that it’s entirely possible that ongoing jitters about tech and/or any volatility in equities could well mean a continuation of the safe-haven bid for the long end and that means more flattening. We’ve been over this on more occasions than I care to count lately, but if you need a refresher on what Deutsche Bank recently called the “hierarchy of vulnerability”, see here and here. Basically, if trade turmoil and geopolitical risks continue to be the proximate cause of risk-off sentiment while Fed hike expectations remain largely unchanged, well then the flattening bias will remain.

In essence, the same things everyone was watching last week (e.g. tech, trade, Trump) will be in focus again and far from any resolution, questions around the “three Ts” (as it were) have only multiplied over the long weekend.




7 comments on “The 3 ‘T’s: Full Week Ahead Preview

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  6. Anonymous

    Once the kool-aid drinkers break the market will break.

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