April 11, 5:00 pm EST

As we came into the week, the economic, political and corporate calendar was relative light.  With that, I suspected markets would be relatively quiet.

Of course we have had an ECB meeting and minutes from the Fed.  Often, these would be market moving events.  Not this week.  As we discussed yesterday, we clearly know where they stand.

So, what’s next?  Earnings.

First quarter earnings season kicks off next week.  We’ll hear from the major banks.  Earnings will be the catalyst for where stocks go from here – and banks will set the tone.   The building theme has been “earnings recession.”

After 20%+ earnings growth in 2018, following a historic corporate tax cut, anyone would expect earnings growth to be less hot than last year.  Some were even predicting that the hot numbers of last year would be a peak in earnings growth.  After all, under ordinary circumstances (in a stable economic environment) we’re very unlikely to see the U.S. stock market grow earnings by excess of 20%.  That’s not much of a story .

But the media loved the shock value of the phrase “peak earnings” last year, and ran it in headlines, conveniently excluding the word “growth.”  Peak earnings is very different than peak earnings growth.

Still, the broad market sentiment on future corporate earnings eroded through the end of 2018, and has continued to erode through 2019.

And both Wall Street and corporate America are more than happy to ride the coattails of lower sentiment by lowering the expectations bar on earnings.  When sentiment is leaning that way already, there is little-to-no penalty for lowering the bar.  That just sets the table for positive surprises.  They did it for Q4 2018 earnings.  And they beat expectations.  And they have set the table for positive surprises for Q1 2019 earnings.

Just how low has the bar been set for Q1?

April 10, 5:00 pm EST

The minutes were released from the March Fed meeting today.  But we already know very clearly where they stand.

Remember, they spent the better part of the first three months of the year marching out Fed officials (one after another) to give us a clear message that they would do nothing to kill the economic recovery.

Just in case there was any question, Jay Powell stepped in just ahead of the March Fed meeting with an exclusive 60 Minutes interview, where he spoke directly to the public, to reassure everyone that the economy was in good shape, and that the Fed was there to promote stability (i.e. rates on hold and even prepared to act if the environment were to turn for the worse).

As expected, the ECB echoed that position today, following their meeting on monetary policy.  As we’ve discussed, the major global central banks have again coordinated both messaging and policy to ward off an erosion of confidence in the global economy.   No surprises.  And I’m sure managing the U.S. 10-year yield has been part of that coordinated response.  In addition to the speculative flows that have pushed yields lower, I suspect there has been a healthy dose of central bank buying (Bank of Japan and others through sovereign wealth funds).

With that, even though stocks have bounced back, commodities are on the move, and we’ve had improvements in global economic data, we still have European 10-year yields (Germany) at zero and U.S. yields at 2.50%. That is promoting the global central bank stability plan.