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The charts that matter: “business as usual” is over

A lot of genuine news happened this week – but how will it affect the markets? John Stepek looks for clues in the charts that matter most to the global economy.

Welcome to your weekend edition, where we take a look through the charts that matter and catch up on anything else that we missed during the week.

If you missed any of this week's Money Mornings, here are the links you need.

Monday:What Trump's spat with Trudeau means for global trade

Tuesday:This is no high street horror show it's just capitalism at work

Wednesday:It's only a matter of time before this hated metal makes a comeback

Thursday:Central banks are stepping out of the spotlight and it's about time

Friday:Europe should deal with its problems now, while it still has time

The podcast is back! This week, Merryn and I discuss Trump, trade and putting America First; Merryn reports from Italy on the political mood in the country (a fervent desire for change is evident, and as usual, it all boils down to debt); and I defend the shy, retiring behemoth that is Amazon from calls for its dismantling.

Have a listen here we pride ourselves on trying to keep it to about 20 minutes, so even if you're a newcomer to podcasts, give it a listen we do try not to outstay our welcome (although I'll let you be the judge of that).

The shape of the new world order is becoming clearer

This was one of those weeks in which a lot of genuine news happened. By genuine news, I mean events that might actually be worth paying a bit of attention to. You don't get them that often. And even when news does happen, it doesn't always matter to markets or to your portfolio.

It's not so much the individual events Trump's G7 snub, the North Korea handshake, and the big central bank meetings to my mind, the big deal about this week is that, taken together, it became very clear that we are starting to emerge from the money-printing induced limbo that we've been in for nearly a decade now, and the world we're entering is very different to the globalised, almost apolitical world we left behind. The narrative has changed.

America has a new set of priorities it doesn't want to be the global policeman anymore, and it feels that it should be getting a better deal from all of its trading partners. (I've written about this in a lot more detail in the magazine this week.)

Meanwhile, the Federal Reserve made it clear that interest rates will keep rising. The European Central Bank laid out a timeline for ending quantitative easing and the Bank of Japan kept on printing, but there's a sense that even there, central bankers are acknowledging that there's only so much they can do.

How does this translate into markets? For now, it means a higher US stockmarket. For now, it means fear of missing out; it means making money while it's still available. I wouldn't be surprised if Jeremy Grantham's "melt-up" prediction comes true.

But that's partly going to be driven by a retreat from risk elsewhere. Emerging markets are hurting right now; junk debt surely has to be on the hit list too.

If you weren't doing it already it's time to tread carefully.

Now over to this week's charts.

Gold is still! floating around $1,300 an ounce. What really surprises me is that it's not lower. A genuine belief in rising interest rates in the US shouldn't go alongside a static gold price. So what's going on?

I think there's concern about inflation in there, but I also think there's concern about what might go wrong as the world's central banks step back and the world's politicians step forward.

180615-MWU01-gold

(Gold: three months)

The US dollar index a measure of the strength of the dollar against a basket of the currencies of its major trading partners picked up as the euro slipped back, as the European Central Bank managed to map out an end to quantitative easing in a very "doveish" manner.

180615-MWU02-USD

The yield on the ten-year US Treasury bond was little changed this week.

180615-MWU03-treasuries

(Ten-year US Treasury: three months)

The yield on the ten-year German bund the borrowing cost of Germany's government, which is Europe's "risk-free" rate eased off, too, as the threat of early ECB withdrawal faded.

180615-MWU04-bunds

(Ten-year bund yield: three months)

Copper slipped back from last week's strike-inspired surge.

180615-MWU05-copper

(Copper: three months)

The unusual calm around bitcoin of the last week or so was rudely broken. The cryptocurrency slid from the $7,800 mark as low as $6,200. This was partly down to another massive hack, this time in South Korea.

180615-MWU06-bitcoin

(Bitcoin: ten days)

On US employment, the four-week moving average of weekly US jobless claims fell a little to 224,250 this week, while weekly claims came in at 218,000.

According to David Rosenberg of Gluskin Sheff, when US jobless claims hit a "cyclical trough" (as measured by the four-week moving average), a stockmarket peak is not far behind (on average 14 weeks), and a recession follows about a year later.

We hit a new trough four weeks ago, so if there's anything to Rosenberg's observations (and of course, they are drawn from a limited pool of past cycles), then we should see the stockmarket hit new highs before this cycle is out.

180615-MWU07-jobless

(US jobless claims, four-week moving average: since January 2016)

The oil price (as measured by Brent crude, the international/European benchmark) slipped back this week as investors wait for the upcoming meeting of oil cartel Opec.

180615-MWU08-oil

(Brent crude oil: three months)

Internet giant Amazon is still the stock that everybody wants to own.

180615-MWU09-amazon

(Amazon: three months)

Electric car group Tesla continued to rally strongly this week, partly because Elon Musk fired nearly one in ten of his employees. Wall Street even Tesla investors loves a job cut, so that's been taken as a sign that he's serious about making the company work.

180615-MWU10-tesla

(Tesla: three months)

Have a great weekend.

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