On Thursday, I had the pleasure of joining the crew from CNBC’s Power Lunch to discuss my market views coming into the 2nd quarter. While we’ve been fully anticipating this recent pullback, some of the more recent underlying challenges have me a bit more concerned than I normally would be during a much needed, and standard, pullback. It’s difficult, during a 3 minute segment, to properly articulate complex subject matter; so, I thought I would take a moment to share with you some of my current market concerns.

3-Month LIBOR (European Banks) – Over the last few weeks, the London Interbank Offered Rate has been moving up rather rapidly and not gaining much media attention. Basically, the LIBOR rate is what is used in Europe to determine overnight lending between banks. A spike in this rate signals that banks are becoming increasingly concerned about other banks’ ability to repay short term loans and charge more for standard, overnight lending. While the US Fed Funds Rates have also been on the rise, the acceleration of the LIBOR rate is much greater and may be signaling some unknown stress within the financial markets. A standard metric to view this potential ‘stress’ is called the TED Spread or the difference between the LIBOR rate and short-term US Treasuries. Whenever a spike like this starts to transpire, there can be many reasons why; and, unfortunately, one never knows exactly why until weeks or months after. Nonetheless, I view the current activity in this space as a temperature gauge of the overall market and it’s safe to say the recent rise is indicative of a patient starting to spike a fever.

What’s particularly concerning with this is the action we’re seeing in European banks, most notably Deutsche Bank. You don’t have to be a rocket scientist to see the challenges this bank is facing, and the potential collapse in this company or the ‘bail out’ that may be required.

It has been a long time since we’ve seen or heard about financial stress across the pond; but, make no mistake, the same financial difficulties in the Eurozone that existed several years ago with Greece and so many others, still exist today. The subtle signs we’re seeing now may either be warning us that the storm is once again brewing or it’s just a short term blip in their longer term recovery.

Copper – As many of you know, Copper has been one of my early signals regarding the economic growth in this country and abroad. Regarded by many as a leading indicator of the overall health of economic activity, Copper has been on a nice move higher since it found its bottom in early 2016. Surpassing the $3.00 level in Copper was a huge feat; and, after a shake in late 2017, it was nice to see this metal once again make new highs. Global demand has been strong and to see the price rise, while inflationary, signaled all was right with the economic rebound and stocks were sure to follow. The leading indicator has served me very well for many years and now is once again under significant selling pressure. For whatever reason, the metal has once again found itself sitting on the $3.00 level; and, despite the strength in equities as we closed out the month, Copper barely budged. I’m watching this asset very closely, and any further weakness would certainly have me even more cautious than I am already. Of course, should the metal catch a bid and start once again trend higher, it would spark the next leg higher in the bull market; more than likely, signaling the next goal of the current administration – infrastructure.

While I would love nothing more than to see this market once again find its footing and trade higher, the above challenges are presenting me with additional concern that I haven’t had in quite some time. These challenges are over and above the headwinds we face through our own Fed Funds rates, which are on the rise; equity valuations, which are priced to perfection, and the continued uncertainty surrounding our tariff and trade predicaments. For all of these reasons, we will continue to hold outsized cash positions and keep a very close eye on stop levels in current holdings.

At some point the concerns will be resolved; and, regardless of where the market is at that time, opportunities will present themselves. Until then, as we wait for more clarity and better risk-reward, I feel patience is the best option.