NYSE and the status of world markets

[DaveTrade]

Markets Brace for CPI Tomorrow

Stocks traded flat today, shaking off the initial concerns following Moody’s decision to downgrade the U.S. credit rating outlook from stable to negative. The Dow gained 91 points, an increase of 0.27%. Meanwhile, the S&P hovered around break-even while the Nasdaq Composite dipped slightly by 0.2%

Leading the charge in the S&P 500 were DaVita, Insulet, and Henry Schein, each climbing more than 7%. Boeing also contributed to the Dow's uplift, soaring over 4% after Emirates announced a whopping $52 billion order for 95 aircraft.

Moody’s announcement on Friday highlighted the U.S.’s “very large” fiscal deficits and the political deadlock in Washington as key reasons for the downgrade. Despite this, the agency maintained America’s AAA credit rating, the highest possible level. This move comes on the heels of Fitch’s earlier decision to lower the U.S. long-term foreign currency issuer default rating to AA+ from AAA, citing similar concerns about fiscal deterioration and political impasses.

Treasury yields remained flat, allowing traders to look past the downgrade in the equity market. Stocks initially fell on the news early Monday morning but later recovered.

Greg Bassuk, CEO of AXS Investments, commented, “We’re seeing investor reaction to the Moody’s downgrade, but we’re also seeing skittishness around some big developments pending this week. We think all eyes are focused on this week’s inflation data and the resulting Fed policy.” Bassuk anticipates continued market volatility through the end of the year, exacerbated by ongoing global conflicts and mixed economic data, dubbing it “the Grinch fueling the Christmas rally this year.”

Investors are now bracing for the release of fresh U.S. inflation data, with the consumer price index update expected Tuesday.

This week promises a departure from last week's focus on Federal Reserve commentary, with a slew of important data and events on the horizon. The spotlight is on Tuesday’s U.S. CPI, but U.S. retail sales on Wednesday will also significantly influence Q3 GDP forecasts. Other key U.S. releases include PPI on Wednesday and various housing data later in the week. Additionally, the NY Fed's 1-year inflation expectations report is due today. The potential U.S. government shutdown looming on Friday adds another layer of uncertainty.

The APEC economic leaders' summit, running in San Francisco until Friday, is another event to watch, especially for the anticipated bilateral meeting between Xi and Biden on Wednesday. Already, there are reports of China potentially resuming purchases of Boeing's 737 jetliners, signaling a thaw in relations.

China is also set for a major data release on Wednesday, while Europe will see the second print of the EA Q3 GDP, the ZEW survey (a German economic projections report), and UK employment and inflation updates. Moody’s is scheduled to conclude its review of Italy’s credit rating on Friday, currently on a negative outlook and just a notch above high-yield territory.

In a more unusual development, Iceland has declared a state of emergency following a series of powerful earthquakes, raising concerns about a major volcanic eruption. However, favorable wind patterns seem to have mitigated the risk to airline travel. This is a relief, as some unlucky travelers may recall being stranded in airports across the world during the last major Icelandic eruption in 2010.

Focusing on the U.S. CPI data due tomorrow, economists expect a modest increase of +0.1% month-over-month due to softer energy prices. They predict the core CPI to edge up to +0.4% from +0.3% last month (consensus at 0.3%). If these predictions hold, the year-over-year rate would be 3.3% and 4.2%, respectively, slightly higher than the consensus for the core rate.

Deutsche Bank also forecasts Wednesday's PPI to show a headline increase of +0.2% (down from +0.5%) and a steady core at +0.3%, with a keen eye on components that directly influence the Fed’s preferred core PCE, like healthcare services and airfares.

U.S. retail sales, also due Wednesday, are expected to be weak, with Deutsche Bank predicting a -0.4% headline change (down from +0.7%), mirroring the forecast for sales excluding autos (down from +0.6%) due to lower gasoline prices. Retail control, a component of GDP, is anticipated to show a modest +0.1% increase (down from +0.6%), a significant drop from the annualized +6.8% growth seen in Q3.

The market's expecting relatively muted data, which means that if we do see a big surprise (either hot or cool) from the CPI tomorrow, stocks could respond with a major move.

 

[DaveTrade]

I See Big Tailwinds for Stocks in 2024
By Marc Chaikin, founder, Chaikin Analytics
We're once again on the verge of a new all-time high... and beyond.

The S&P 500 Index made a new 52-week high in late December. It closed yesterday at roughly 4,780. It's now sitting about 0.4% away from its all-time high at around 4,800.

So in short, the bull market is alive and well.

Even better, as I'll explain today, it has significant tailwinds heading into 2024...

Two major shifts are likely to happen this year.

Thanks to lower interest rates and a resilient domestic economy, we'll likely see a resurgence in small-cap stocks. And I also expect the strength of the S&P 500 to broaden out into the other 493 stocks beyond the so-called "Magnificent Seven" tech mega caps.

That doesn't mean tech stocks will suffer, though. I still expect big things from this space as demand for artificial-intelligence chips and software keeps growing...
Based on the Technology Select Sector SPDR Fund (XLK), tech stocks surged more than 50% in 2023. It was a massive climb.

Since 1990, this sector has surged more than 40% in a single year seven times. According to data from Bespoke Investment Group, tech stocks continued to rally the following year in six of those seven instances. And they produced an average gain of nearly 22%.

That points to even more possible upside ahead for tech stocks.

Another potential driver for stocks in general is that 2024 is a presidential-election year...

Going back to the late 1800s, that's "bullish" for the stock market.

The stock market has only lost 5% or more in six out of 32 presidential-election years since 1896. And in five of those elections, the party in power lost.

Since 1950, the S&P 500 has rallied in 14 of 18 presidential-election years.

The strength was concentrated in the back half of the year, too. The index was up from the end of June through year-end in 16 of those 18 years – with an average gain of 10% over that six-month period.

Why is the market so strong in presidential-election years?

Well, it comes back to the power of the president to pump up the economy and make voters feel good in November. And 2024 shouldn't disappoint on that front...

Interest rates and inflation are still down significantly from their highs. Meanwhile, wages are still on the rise. And consumer sentiment is already on the upswing.

The Federal Reserve will likely cut the benchmark federal-funds rate three or four times in 2024.

And a less visible but equally as important factor is the end of the Fed's quantitative-tightening ("QT") efforts – those policies designed to reduce its balance sheet. The December meeting minutes showed that the Fed talked about it for the first time.

Meanwhile, according to the December Consumer Price Index ("CPI"), prices ticked up 3.4% over the prior year. That's a slight increase from the 3.1% increase in November.

On the other hand, core inflation – which removes the volatile food and energy categories – fell slightly to an annual rate of 3.9% from 4.0% the month prior.

Earnings are on the upswing as well. The Atlanta Fed estimates that fourth-quarter gross domestic product will be up 2.2%. And it expects further gains in the first half of 2024.

That's all great news for investors, of course. Falling inflation overall, declining interest rates, and rising earnings mix together to produce a positive outlook for stocks.

So for now, my point is simple...

I'm as "bullish" as ever on stocks in 2024.

Good investing,
Marc Chaikin

 

[DaveTrade]

Tomorrow’s CPI Could Be “Market Breaking”​

Stocks took a small step up on Monday, building on their gains after the S&P 500 jumped above 5,000 for the first time on Friday. The S&P went up by 0.3% and the Dow wasn't far behind with a 0.5% increase. Meanwhile, the tech-heavy Nasdaq Composite climbed 0.3%, showing that tech stocks still have some juice left.

Nvidia sprinted ahead again with a 2% increase on the morning to set another record. British semiconductor powerhouse Arm wasn’t about to be left in the dust either, as it soared to new heights, continuing its winning streak from last week.

The market's mood has been pretty upbeat, thanks to some surprisingly good news from the corporate world. Big tech companies, in particular, have been hogging the spotlight. Now, everyone’s waiting with bated breath for the next set of earnings reports. There are still a few big names on the list, including John Deere, Coca-Cola, Airbnb, and Kraft Heinz, but with tech out of the way, the next few reports shouldn't be too market-tilting.

But that's not all; the January Consumer Price Index (CPI) report comes out on Tuesday. The CPI could spoil the fun of the last few sessions if it clocks in hotter than expected. Rising inflation would undoubtedly dent sentiment, especially after megacap tech earnings beat estimates. This would cause yields to tumble while spiking volatility, potentially plunging the indexes into a sharp selloff.

Even the folks at Goldman are waving a red flag, saying "We are seeing elevated risk of a momentum reversal," in a weekend note to clients, pointing out that things like Quality, Mega Cap versus Non-Profitable Tech, and HF VIP versus Most Short are starting to show cracks. The bank added that "you don’t want to be on the wrong side during a momentum crash."

And while no one's outright yelling "crash ahead," the S&P skew's recent spike to levels not seen since just before the Volmageddon event in 2018 has eyebrows raised. This was when the VIX went on a wild ride from 14 to 40 in no time flat. Amid this backdrop of what feels like bubble territory and a market too cool to care, Goldman trader Matthieu Martal drops a note. He says, "US tech going parabolic and everyone in the same trades" means, although they're generally positive, the current run in equities seems a bit overdone. They're leaning towards more unloved stocks with sensible price tags.

So, Goldman's strategy is to steer clear of the big tech and high-quality stocks for now due to the risk of a momentum downturn and too many folks in the same boat. They're eyeing up the underdogs and small caps that might benefit from inflation getting back to normal.

The note read:

"To quote a client, you only want to be long vol one in six years and the beginning of a cutting cycle typically bides well for equities. Reflationary risks could be overlooked but you would need a catalyst to de-rail the goldilocks narrative in our view."

In other words, if inflation ticks higher again, all bets are off for how low stocks could go in the short term.

Goldman's observations are pretty clear: the investment world is all in, with data showing everyone's doubling down on the same bets. US tech, in particular, has seen a buying frenzy, making it the popular kid on the block. But this popularity comes with its risks. A little nudge could cause a big squeeze, especially with all the action around cryptocurrencies and meme stocks. They've noticed a trend where the usual winners are starting to lose their shine, suggesting that the easy money might not be so easy anymore.

The excitement around US equities, reminiscent of the dot-com bubble vibes, is making some wonder if this party can keep going. There's a lot of talk about momentum and crowded trades getting too cozy, which could spell trouble. History has shown us that when things look too good, a correction of 25-30% in overvalued areas isn't out of the question.

But it's not all doom and gloom. Strong earnings and a sturdy consumer base are keeping hopes of a soft landing alive. Luxury goods, for example, are still in demand, painting a picture of an economy that's not ready to slow down just yet. However, there are some mixed signals across different markets, hinting that not everything is as rosy as it seems. The consensus on inflation cooling off is strong, but if it starts to pick up again, that could be the curveball no one saw coming.

And if Tuesday's CPI numbers are too hot for comfort, that curveball could hit bulls right in the face.

 

[DaveTrade]

What This 123-Year-Old Theory is Saying About the Stock Market​

February 12, 2024 | Tim Fortier​

More upside to come? Or too late to the party? The classical Dow Theory triggered a Buy signal on 2/8/24 when the Dow Transportation finally surpassed its 12/19/23 highs.​

What is the Dow Theory?​

Tracing its origin back to the early 1900s, the Dow Theory was first postulated by Charles Dow in 1901.
Dow believed that the stock market as a whole was a reliable measure of overall business conditions within the economy and that by analyzing the overall market, one could accurately gauge those conditions and identify the direction of significant market trends and the likely direction individual stocks would take.

The work of Charles Dow, who died in 1902, was further expanded upon by William P. Hamilton’s The Stock Market Barometer (1922), Robert Rhea’s The Dow Theory (1932), and Richard Russell’s The Dow Theory Today (1961).

Besides defining the trend of the market, one of the basic tenets of Dow Theory is that indices or market averages must confirm each other. This means that the signals on one index must match or correspond with the signals on the other.

If one index, such as the Dow Jones Industrial Average, shows a new primary uptrend, but another remains in a primary downward trend, traders should not assume that a new trend has begun.

Dow used the two indices that he and his partners invented, the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA), on the assumption that if business conditions were healthy—as a rise in the DJIA might suggest—the railroads would be profiting from moving the freight this business activity required; thus, the DJTA would also be rising.

Despite being over a century old, Dow Theory remains relevant in today’s high-tech, global markets. Traders worldwide still use its principles to gauge the health of the market and identify potential trading opportunities.

Which brings us back to last Thursday when the DJT confirmed the DJI and joined the party of other indices already in an uptrend.
Critics of the theory cite that by the time a trend is confirmed, a significant portion of the price move may have already occurred, reducing the effectiveness for traders seeking timely entry or exit points.

Critics also argue that this focus on a limited number of stocks may not accurately represent the entire market or specific sectors.
Despite these concerns, one thing remains true:

A trend is assumed to be in effect until it gives definite signals that it has reversed. This tenet forms much of the foundation of modern trend-following approaches.

For market bulls, the current market is showing some improvement from the perspective of trend, as more indices are showing improvement.

For instance, today, the equal-weight S&P 500 is breaking out of a consolidation it has been in since the beginning of the year.

And small-caps, which have lagged the broader market the most, are making a run at their recent high.

Another encouraging sign is that small caps relative to large caps are showing a recent surge in relative performance as this chart demonstrates.

A broadening of the trend would be a welcome relief for many, as one of the most cited concerns for the current stock market rally is the weak market breadth.

The S&P 500’s current rally is being driven by an incredibly small number of stocks, and that has some folks convinced that this narrow “market breadth” is a big warning sign.

And it’s not hard to see their point.

A wider market breadth – which would have more of the index’s 500 stocks rising at once – would make the rally seem altogether more sustainable. It would suggest that more industries and businesses are doing well, implying greater confidence in the economy. It would also mean that the market is less vulnerable to the ups and downs of just a few companies.

With just 26% of stocks outperforming the broader index, the breadth is at a low that’s rarely been seen before (bottom half of the chart).

In fact, the last two times leadership was this narrow were in the Nifty 50 period of the 1970s and during the dotcom boom of the late 1990s.

In those cases, stocks did continue to rise for a while. But it eventually ended in tears with stock prices dropping 50%.

The industry curve has also yet to reflect any improvement with only 40% of the curve currently bullish.

Ideally, this begins to show some signs of improvement to better align with the signal coming from the Dow Theory.

While modern markets are much different than when the Dow Theory was originally founded, the basic tenets of trend following remain true today. Currently, the price trend of many of the popular stock market averages are in favorable positive trends, despite the noted concerns.

Charles Dow had once compared the markets to that of the tide. Currently, the tide is still rising – is it strong enough to lift more boats?

Until next time,

 

[DaveTrade]

Comparison of the equal weighted S&P500 index (RSP) and the Transportation index (IYT):

 

[DaveTrade]

Somebody Is Lying
By Jeff Clark, editor, Market Minute
This is the most dangerous chart in the financial markets…

This is a chart of the iShares 20+ Year Treasury Bond Fund (TLT). It’s an exchange-traded fund that tracks the action in long-term Treasury Bonds.

And, it’s about to break down from a descending triangle pattern.

Why is that dangerous?

Because, as bond prices fall, longer-term interest rates rise. And, rising rates are bad news for stock prices.

Please understand, the Federal Reserve Board sets the target for short-term Federal Funds interest rates. That’s the rate over which stock market investors have been obsessing. That’s the rate most folks expect the Fed will cut two or three times this year.

Bond investors determine what happens with longer-term interest rates.
Based on the look of the above chart, TLT looks set to fall. That means longer-term rates are set to rise.

TLT peaked in December near $99 per share. Since then, it has tested support at $91 multiple times. While support held each time, the bounces off of the $91 level have peaked at lower levels.

This action has created a descending triangle pattern. This is a bearish pattern that usually breaks down and leads to a sharp move lower.

In the case of TLT, a breakdown from here could lead to a drop towards $83.

Longer-term interest rates could head back up to where they were last October – above 5%.

Stock market investors have ignored this situation, so far. TLT is down 8% since the start of 2024. Yet, the S&P 500 is up more than 10%.
Somebody is lying.

Stocks and Treasury bonds typically move in the same direction. So, this sort of divergence is notable.

One of these assets is due for an epic reversal. Either Treasury bonds need to rally to catch up with the action in stocks. Or, stocks are going to be pulled down to match the action in bonds.

The widely accepted opinion on Wall Street is that bond investors are smarter than stock investors.

We’ll soon find out if that’s true.

Best regards and good trading,

Jeff Clark
Editor, Market Minute

 

[DaveTrade]

A change is happening, read all about it in the link below.

You should click here now to read it, along with the other valuable insights and ideas on that page>>>

 

[DaveTrade]

Markets Dip Ahead of FOMC Decision
Stocks fell this morning as new labor data came in hotter than expected, while investors await the Federal Reserve's upcoming interest rate decision and earnings from Amazon.
The S&P 500 and tech-heavy Nasdaq Composite each slipped roughly 0.7% and 0.8%, respectively, after closing with small gains. The Dow Jones Industrial Average fell about 0.8%, and the yield on the 10-year Treasury jumped about 6 basis points to trade near 4.67%.

According to new data released by the Bureau of Labor Statistics, the employment cost index, which measures compensation and benefits, increased 1.2% from December to March — the highest increase in a year — after rising 0.9% at the end of 2023. Wages and salaries increased by 1.1% over that same three-month period, while benefit costs also increased by 1.1%. The data adds to ongoing concerns that persistently high wages are keeping inflation levels elevated.

Stocks are on track to post their worst month of 2024, as a brutal mid-April stretch means the major indexes are set to end the month with losses. However, investors are looking to continue making headway on a rebound that has pervaded over the last week.

Thus far, anticipation over the Fed's next move is battling for attention with better-than-expected quarterly results, with surprises from companies like Paramount and Tesla playing their part.

Investors are bracing for policymakers to hold interest rates at historically elevated levels at the Fed's two-day meeting, set to start today. The prospect of rate cuts has retreated dramatically since the start of the year, helping drive up Treasury yields — a familiar systemic problem for stocks.

Amazon's results after the bell will be closely watched after Microsoft and Alphabet's stellar earnings lifted hopes for a "Magnificent Seven" boost this season. So far, Big Tech results have both impressed Wall Street and revealed its impatience with heavy AI spending.

Highlights on the early earnings docket include Coca-Cola and McDonald's, with AMD and Starbucks also coming after the markets close.

The Dallas Fed's Services survey also painted a gloomy picture of the US economy this morning, with the headline print dropping from -5.5 to -10.6, marking the 23rd straight month of contraction. This period of contraction is now just one month shy of the span of decline seen around the collapse of Lehman Brothers.

Looking ahead, the survey presents a stagflationary outlook, with revenue expected to grow slower and prices expected to rise faster. General Business Activity is also expected to decline for the first time since November 2023.

However, it is the respondents' answers that provide the most insight into the current state of the American economy. Many businesses are grappling with inflationary pain, with one respondent in the long-haul truck repair industry noting that declining volumes and rising costs are making the outlook for trucking "not pretty." Persistent inflation and the possibility of the Fed delaying rate cuts are causing uncertainty for the second half of 2024.

Political and geopolitical uncertainty is also weighing on many firms. The stress of an election year is adding to concerns about the direction of the economy, and international conflicts and rising long-term rates are raising concerns. Some respondents also point to overregulation as a burden on businesses, taking away time and money.

High interest rates are another major issue, with one respondent reporting that their cost of funds jumped from 9% to 14% after renegotiating their debt facility, leading to price increases for customers. The Federal Reserve's signaling that it will hold rates at the current level for longer is negatively affecting outlooks, and the recent movement in long-term rates is delaying expected investment recovery until 2025 or later.

Finally, there is a sense of panic in the air, with one respondent in the construction machinery and material handling industry stating that they have not been this slow since the Great Recession, even including the COVID period. The prospective real estate market is described as "terrible," with people not filing zoning cases, indicating a lack of construction in the near future.

Indicators of stagflation continue to pile up as a result. And, with the Fed's interest rate decision looming tomorrow afternoon, Powell & Co. face yet another critical moment.

 

[DaveTrade]

Possible 27/7 trading on NYSE;

see the news story here.

 

[DaveTrade]

NYSE BPI has had a recent change;

True Market Insiders - Programs

True Market Insiders - Programs

truemarketinsiders.io

 

[DaveTrade]

It’s a Little Too Early to Buy Into the Energy Sector
By Jeff Clark, editor, Market Minute
Don’t rush to buy into the energy sector just yet. Oil stocks have farther to fall.

The Energy Select Sector Fund (XLE) is down nearly 6% over the past month. It is one of the worst-performing sectors for May. As a result, bargain hunters are looking to buy.

But it’s too soon.

Still on a Sell Signal​

The Bullish Percent Index for the Energy Sector generated a sell signal in late-April when it turned lower from overbought conditions. At the time, the financial media talking heads were universally bullish on the energy sector. Oil was trading for more than $80 per barrel. And the talking heads argued that oil companies were “printing money.” They recommended buying the oil stocks.

We argued the other side. BPENER buy and sell signals have an excellent track record. So, we suggested patient investors would get a better buying opportunity a few months down the road.

It has only been one month. The XLE is 6% lower. That already qualifies as a better buying opportunity. But, let’s stay patient… the opportunity is likely to get even better.

Here’s an updated look at the BPENER…

A bullish percent index (BPI) measures the percentage of stocks in a sector that are trading with bullish technical patterns. It’s designed to measure overbought and oversold conditions.

An index is overbought when it registers above 80 – meaning 80% of the stocks in the sector are trading with bullish patterns. An index is oversold when it drops below 30.

The blue arrows on the chart point to when the BPENER rallied above 80 and then turned lower from overbought conditions. That action generates a BPENER sell signal. Usually, it’s a good idea to avoid owning energy stocks in this situation.

We’ve had three previous BPENER sell signals over the past two years. Energy stocks sold off hard following all three of those signals. The 6% decline we’ve seen in the energy sector over the past month would be the mildest of all of those declines.

There’s Still Room to Fall​

Notice also that following the sell signals in 2022, the BPENER dropped below 5 – meaning that only 5% of the stocks in the energy sector were trading with bullish technical patterns. The sell signal last September pushed the BPENER below 40 before it stopped declining.

The BPENER closed Wednesday at 59. That’s closer to overbought than it is to oversold. It suggests that energy stocks still have plenty of room to fall farther.

Traders don’t need to rush to buy into the energy sector right now. Stay patient. We’ll have a better chance to buy a few weeks from now.

Best regards and good trading,

Jeff Clark
Editor, Market Minute

See my chart below, I'm looking to see what happens when it gets down to the moving average. There may be more sideways to come.

 

[DaveTrade]

Most if not all sectors are turning down or sideways right now, it looks like it's going to be a messy week in the markets. Maybe the picture will come clearer at the end of next week. Sometimes you just have to wait and see what happens.

 

[DaveTrade]

Stocks Stumble as Powell Plays Inflation Hot Potato

Bulls got a rude awakening Tuesday as stocks slipped lower, with investors growing increasingly jittery ahead of crucial jobs data later this week. The Dow Jones Industrial Average and S&P 500 both edged down, while the tech-heavy Nasdaq Composite managed to eke out a small gain.

But it was Fed Chair Jerome Powell's comments that really spooked the market. Speaking at a conference in Portugal, Powell tried to thread the needle between optimism and caution on inflation. He acknowledged recent positive inflation data but stressed that the Fed needs more evidence before easing monetary policy. Powell's remarks sent a chill through Wall Street, with traders worried the central bank might keep rates higher for longer.

Adding fuel to the fire was a surprisingly strong job openings report. The JOLTS survey showed 8.14 million job openings in May, blowing past economist estimates of 7.95 million. This resilience in the labor market could give the Fed more room to stay hawkish.

The 10-year Treasury yield, which had surged Monday, retreated slightly to 4.43% as investors recalibrated their rate expectations.

Meanwhile, political uncertainty is casting a long shadow over markets. Wall Street is starting to seriously consider the implications of a potential Trump victory in 2024, especially as doubts grow about Biden's future as the Democratic nominee.

In corporate news, Tesla provided a rare bright spot. The EV maker delivered 443,956 vehicles in Q2, beating Wall Street expectations and sending shares up about 5% in early trading.

But overall, the mood on Wall Street remains cautious. As we head into the back half of 2024, it's clear that inflation, interest rates, and political wildcards will keep investors on their toes. The easy money days of 2023 are long gone, and traders will need to stay nimble to navigate these choppy waters.

Don't be surprised if we see more volatility ahead, especially as we approach Friday's all-important jobs report. Remember, in this market, good news can quickly turn into bad news if it gives the Fed reasons to keep tightening the screws.

Stay alert, and don't get caught flat-footed if the Fed's rate cut expectations shift. The market's reaction to today's news shows just how sensitive investors are to any hint of hawkishness from the Fed. With inflation still above target and the job market showing resilience, the stage is set for a potential showdown between market expectations and Fed policy.

 

[Knobby22]

Trying to work out what i should do if Trump gets in. No politics, economics only.

So Trump raises tariffs by 10-20% with the rest of the world (more for China) as promised.

1. This will drop USA consumption because the stuff they buy has gone up 10% crushing their expenditure. So be careful owning companies relying on that. The IMF has said the tariffs would cut growth by 0.8% in the first year and 1.3% in the second, particularly hitting the middle class and the lower class. A tariff is highly regressive and they won't be getting tax cuts - the tax cuts are for companies and the top tax bracket. Maybe he will give helicopter money again? then high inflation will likely occur.

2. Europe will get hurt. According to the IMF, Germany will be hit worst with a -1.5% GDP effect. The rest of Europe will suffer a -1% effect.
they won't be able to export as much and items such as cars. chocolate, perfume will be hit.

3. China's economy will also suffer. They will try to retaliate. Last time, Trump had to support farmers when the previous tariffs occurred due to China targeting fertilizer, they will do their worst. one way they can attack is withholding the rare earth production. According to Steve B in the Age, a new law is restricting this already and every sale overseas has to be reported. Thirdly they could take out Taiwan wher many semiconductor chips are made.

4. Europe will either do a deal with Trump against China or a deal with China against the USA. It is estimated that Europe retaliatory action will cause a lot of damage to the USA as they will be highly targeted like last time.

5. Australia - hopefully we can avoid the trade war and enjoy cheap products from all three blocks as they seek to supply one of the only decent free markets left. Cheap cars, cheap champagne, cheap fertilizer. Could be good for us, but how do we invest to win from this? (Could the UK avoid the trade war?)

6. World -Last time this happened the world went into Depression, is that a possibility this time? I would be careful holding International shares once the glow of the win has subsided.

So what should we invest in? the domestic economy? Banks? maybe some big winners in the USA due to lower tax rates on companies?

 

[DaveTrade]

Trying to work out what i should do if Trump gets in. No politics, economics only.

So Trump raises tariffs by 10-20% with the rest of the world (more for China) as promised.

1. This will drop USA consumption because the stuff they buy has gone up 10% crushing their expenditure. So be careful owning companies relying on that. The IMF has said the tariffs would cut growth by 0.8% in the first year and 1.3% in the second, particularly hitting the middle class and the lower class. A tariff is highly regressive and they won't be getting tax cuts - the tax cuts are for companies and the top tax bracket. Maybe he will give helicopter money again? then high inflation will likely occur.

2. Europe will get hurt. According to the IMF, Germany will be hit worst with a -1.5% GDP effect. The rest of Europe will suffer a -1% effect.
they won't be able to export as much and items such as cars. chocolate, perfume will be hit.

3. China's economy will also suffer. They will try to retaliate. Last time, Trump had to support farmers when the previous tariffs occurred due to China targeting fertilizer, they will do their worst. one way they can attack is withholding the rare earth production. According to Steve B in the Age, a new law is restricting this already and every sale overseas has to be reported. Thirdly they could take out Taiwan wher many semiconductor chips are made.

4. Europe will either do a deal with Trump against China or a deal with China against the USA. It is estimated that Europe retaliatory action will cause a lot of damage to the USA as they will be highly targeted like last time.

5. Australia - hopefully we can avoid the trade war and enjoy cheap products from all three blocks as they seek to supply one of the only decent free markets left. Cheap cars, cheap champagne, cheap fertilizer. Could be good for us, but how do we invest to win from this? (Could the UK avoid the trade war?)

6. World -Last time this happened the world went into Depression, is that a possibility this time? I would be careful holding International shares once the glow of the win has subsided.

So what should we invest in? the domestic economy? Banks? maybe some big winners in the USA due to lower tax rates on companies?

What I'm planning to do is watch the sectors after the election to see where the money is going. That will be my guide.

 

[Garpal Gumnut]

Good comments @Knobby22 and @DaveTrade

Stocks in the US and here in Australia will be able imo to manage any of the eventualities mentioned above except a Chinese invasion of Taiwan which is more unlikely than likely. But these are crazy times.

Keeping an eye on sectors is a great idea as well as the US Dollar.

gg

 

[qldfrog]

Trying to work out what i should do if Trump gets in. No politics, economics only.

So Trump raises tariffs by 10-20% with the rest of the world (more for China) as promised.

1. This will drop USA consumption because the stuff they buy has gone up 10% crushing their expenditure. So be careful owning companies relying on that. The IMF has said the tariffs would cut growth by 0.8% in the first year and 1.3% in the second, particularly hitting the middle class and the lower class. A tariff is highly regressive and they won't be getting tax cuts - the tax cuts are for companies and the top tax bracket. Maybe he will give helicopter money again? then high inflation will likely occur.

2. Europe will get hurt. According to the IMF, Germany will be hit worst with a -1.5% GDP effect. The rest of Europe will suffer a -1% effect.
they won't be able to export as much and items such as cars. chocolate, perfume will be hit.

3. China's economy will also suffer. They will try to retaliate. Last time, Trump had to support farmers when the previous tariffs occurred due to China targeting fertilizer, they will do their worst. one way they can attack is withholding the rare earth production. According to Steve B in the Age, a new law is restricting this already and every sale overseas has to be reported. Thirdly they could take out Taiwan wher many semiconductor chips are made.

4. Europe will either do a deal with Trump against China or a deal with China against the USA. It is estimated that Europe retaliatory action will cause a lot of damage to the USA as they will be highly targeted like last time.

5. Australia - hopefully we can avoid the trade war and enjoy cheap products from all three blocks as they seek to supply one of the only decent free markets left. Cheap cars, cheap champagne, cheap fertilizer. Could be good for us, but how do we invest to win from this? (Could the UK avoid the trade war?)

6. World -Last time this happened the world went into Depression, is that a possibility this time? I would be careful holding International shares once the glow of the win has subsided.

So what should we invest in? the domestic economy? Banks? maybe some big winners in the USA due to lower tax rates on companies?

You know my thoughts so Trump over Harris for the sake of freedom, democracy what is left of western civilisation.
But you are right, this has a price and i think we will pay it:
I expect a fall in AUD value vs USD.
And an initial jump of USD vs other currencies.
But disagree on your point 1: yes tariffs are inflationary but the US is still manufacturing a lot, inflation is needed to avoid default so at least this way will save jobs
China is not as big for them as it is for us..i do not expect tariffs on China to have too big an effect on US consumption.
Point 2 and 4: Discard EU: economically it is gone and dusted, it even willingly destroyed its remnants of industry with Russian boycott pretences
Point 3 is true but economic war is already on.the fact is we will be the one squashed: IO and coal exports could slump.some will pretend a chinese QE will boost fmg,rio and bhp but just a better opportunity to offload them.
Point 6 missing :Ukraine war will stop and the US will have an open feed there, so a plus for the US, we will just, and the EU pay for it..to rebuild Ukraine ..bad Putin...
Point 7: middle east..not too sure there but could see a lot of action on oil price
So Trump will in short bring back truth to the economy and that is bad news for our Chinese mineral export house.
bad for us short term too
Medium term, nothing will save the US from its debt and Trump would avoid the Democrats way out,(war)
So USD will fall and inflation rises.
I position myself USD for a quick gain, avoid IO exposure on medium term, keep oil and gold exposure, and prepare for a hard time /recession in Australia with exports fall

 

[divs4ever]

IF Trump wins , we already have documented electoral interference ( both foreign and domestic ) .. so no 'done deal there

will there be civil unrest

if Harris wins will there be civil unrest OR a military coup .

assuming there is no unrest , taxes is the US WILL go up ( it is the who and how much that is undecided )

so higher taxes , more government borrowing , and MAYBE more manufacturing returning to the US

personally i noticed Indonesia has been accepted into BRICS+ and i can invest in some companies operating in Indonesia on the ASX


i will stay a relative spectator of the US circus

 

[DaveTrade]

i will stay a relative spectator of the US circus

Ditto

 

[qldfrog]

Ditto

But it will affect us whether we like it or not....