Diamonds and Dogs

8/14/19

Flight to safety. Global economic weakness, escalating China-US trade war tensions, rioting and protests in Hong Kong and political uncertainty in Argentina has investors fleeing to safe havens. Gold ETF (GLD) is up a percent and up 7% for the month. The iShares 20+ Year Treasury Bond ETF (TLT) is up 2% today and up over 7% for the month. The yield on the benchmark 10-year Treasury note fell to 1.623%, below the 2-year yield at 1.634%. The last inversion of this part of the yield curve was in December 2005, two years before a recession brought on by the financial crisis hit. According to Credit Suisse, a recession occurs, on average, 22 months following such an inversion.

Macy's (M) taking a hit. The flagship retailer is down 12% to a nine year low following earnings. Macy's missed earnings estimates as sales fell 0.5% to $5.5 billion. Macy's did achieve a seventh consecutive quarter of comparable-store sales growth, but a slow start to the quarter and a weak end to the quarter caused inventory to rise as Macy's experienced a fashion miss in their key women's sportswear private brands and an accelerated decline in international tourism to New York. In other words, it's a tough time to be a retailer.