Greetings from Mykonos, Greece. Since I am traveling with my wife and exploring the Greek Isles, I’m going to keep my commentary brief for the next couple weeks.
One of the benefits of traveling abroad is you are removed from the daily machinations of the markets, which sometimes makes it a bit easier to focus on the big picture. And while the following will likely wind up in the category entitled Captain Obvious, this market is clearly news-driven and focused on trade.
For some time now, traders have been assuming a trade deal between the U.S. and China would get done at some point soon. The narrative has been that neither side – or the global economy, for that matter – can afford a prolonged trade war. Once you factor in the economic data, the financial market reactions, and the politics involved, the conclusion has been the trade spat would end – sooner rather than later. And once the ink has dried on the deal, the assumption is that the global economy will experience a surge as folks make up for lost ground and get back to business as usual.
However, last week markets became concerned as the two countries appear to be deviating from the plan. President Trump’s proclamation that China was backing away from the deal triggered tweets suggesting more tariffs would be forthcoming. In response, China started talking about what is commonly referred to as the “nuclear option” – as in China dumping treasuries.
The response by the markets might best be summed up with the words, “uh oh!” While noone “really” expects China to start dumping its massive pile of U.S. T-bonds, the threat alone does represent a sizable bargaining chip.
So there you have it. The U.S. is threatening to place tariffs on basically all Chinese goods and China has publicly introduced the so-called nuclear option. For the markets, this represents a stalemate – and the fear that the “tiff” might become prolonged.
So, for now at least, the current news-driven market environment will likely continue. Speaking of which, my plan is to try and simply ignore any emotional market moves and be ready to put the small amount of dry powder I have to work into any further hysterics. But now it’s time to head to the beach as the U.S. markets don’t open for another 6 hours!
At the time of publication, Mr. Moenning held long positions in the following securities mentioned: None – Note that positions may change at any time.
Thought For The Day:
Failure is the condiment that gives success its flavor. -Truman Capote
All the best, David D. Moenning Chief Investment Officer
At the time of publication, Mr. Moenning and/or Redwood Wealth Management, LLC held long positions in the following securities mentioned: None
Note that positions may change at any time.
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