Trump's Replies To Media On China Are Hurting Stock Market

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Posted: Dec 10, 2018 10:48 AM
Trump's Replies To Media On China Are Hurting Stock Market

The fact is that even when the market was at the high of the year, winners and losers were split right down the middle. This has been a tough market all year long, made tougher than easy money stocks that began leading the market lower. 

Now is not the time to panic. It’s the time to have your head on a swivel looking for opportunities. I have gotten in and out of ideas much quicker than usual on the Hotline. However, there are a lot of names so oversold right now that it will be significantly higher in a year and years from now. 

There is certainly too much noise in the air, too many unanswered questions, and a lot of moving parts, creating the swirl of confusion and anxiety.

The biggest source of confusion came from the White House, which stepped on its own success and message over and over again.  It’s time for President Trump to reel in the advisors and switch to radio silence, with respect to Chinese trade negotiations. As much as I like and admire Larry Kudlow and Peter Navarro, they made things demonstrably worse last week.

Navarro gave direct insight and breaking news as a guest on my show on Tuesday. However, by the end of the week, there was clumsy overexposure by too many folks in the administration, coupled with that one unnecessary tweet that came just as the market was poised to make a stand. 

To me, it’s clear China wants to make a deal, and it won’t be lip service or phony promises made in the past. Sure, the Huawei situation adds another wrinkle as China demands the return of the company’s chief financial officer. There was very little uproar on Capitol Hill over the arrest. 

For most, the arrest was a long time coming. In fact, it happened during these negotiations, which underscores the notion that the United States isn’t going to look the other way anymore. 

Time to Shut Up

President Trump has fallen into a trap of answering to people that want to see him fail and will say any answer isn’t enough. The powers that be on Wall Street can come on TV and can claim there needs to be more information on the China situation, but the administration has made a big mistake trying to appease those folks.

The replies have hurt the stock market, not helped it.  

When I began working as a stockbroker, the first thing I was taught was to ask for the order and shut up…after talking, overcoming rebuttals and presenting the value proposition, the best weapon is silence.  It’s time for the White House to zip it and let the negotiating team led by Lighthizer hammer out and paper a deal.

Rough Sledding

Last week was difficult for the market, which ended with more questions than answers by the time the closing bell mercifully rang on Friday.  By the time the dust settled, two of the three major indices had turned negative for the week, with the NASDAQ clinging to a net 1% point gain.

Blink of Eye

Week

Y-T-D

Dow Jones Industrial Average

-4.5%

-1.3%

S&P 500

-4.6%

-1.5%

NASDAQ Composite

-4.9%

+1.0%

If the Dam Breaks

The major indices are right at key support points, which have held, but the question is for how much longer. Conversely, it’s just like the resistance that holds and eventually turns stocks or indices lower; if these support points hold up, it could spark a major rally.

On the downside, I’m not sure where the market would land if support points don’t hold. Charts are useful until the market smashes pivotal points, especially on the downside, and new parameters have to be reestablished.

Range Bound

Low

High

S&P 500

2,815

2,641

Dow Jones industrial Average

24,442

26,191

NASDAQ Composite

7,050

7,570

The Economy

The economy is fine, although parts are struggling. The market is adjusting for slower growth, but the optimal word is growth. And that’s why I think we could have a major move to the upside next that will bring new all-time records. 

Between now and then, there is a lot of confusion. Investors are going to be holding a lot of oversold stocks with the broad market seeking leadership, which could still be old leadership.

Getting a Piece of the Action

The jobs report was fantastic, which showed amazing gains for high school grads and dropouts.  Moreover, Blacks, Hispanics, and women saw improved unemployment rates. There are more details in the December newsletter, but here are two stats I think we should all cheer.

For the first time in four years, non-supervisory workers saw faster wage growth than their supervisors.  While the headline wage change came in at 3.1% (rank and file), folks enjoyed a 3.24% jump.

Will Powell let this continue?

When is the recovery over?

Is it important that we have a slowdown in order to extend the recovery and is that better than a short recession but strong subsequent rebound?

New Collar Jobs Bonanza

Consider in November that the unemployment rate plunged for those with less than high school educations, and it was even better for those with only a high school diploma. In fact, the unemployment rate for high school only grads is now the lowest since 2000.  

The JOLTS report could see another month of seven million+ job openings.

November 2018

Unemployment Rate

Educational Attainment

Rate

Change

Less than High School

5.6%

-0.4

High School

3.5%

-0.5

Some College

3.1%

+0.1

Bachelors +

2.2%

+0.2

Current WSS Portfolio Approach Portfolio Distribution

Everyone should have substantially more cash than normal. If that’s not the case, please contact your rep or research@wstreet.com

Communication Services

Consumer Discretionary

Consumer Staples

Energy

Financials

Health Care

2

2

1

1

1

1

Industrials

Materials

Real Estate

Technology

Utilities

Cash

2

4

0

1

0

5

 

Today’s Session

The market clawed its way to positive territory moments before the open when news hit Qualcomm (QCOM) won a court decision against Apple (AAPL). Qualcomm claims stop imports of almost all Apple’s iPhone while Apple suggests the order covers models no longer manufactured.

Technical

Technical traders have been worried about the so-called “death cross” where the 50-day moving average dipped below the 200-day.   Chartists say this is a signal for a lot more pain to come.  I don’t buy into this formation/theory but more weakness could make more people believe.