“There’s a world of difference between truth and facts. Facts can obscure the truth.”
— Maya Angelou
For over a year, now, the market’s rallies have been motivated by periodic announcements that the China trade dispute/war was resolved. When that particular narrative faltered, there was often a dovish FOMC-related news blurb of some sort.
At this juncture, neither appears likely to come to the rescue of an ailing market. Through a series of tactical errors, Trump has squandered any advantage he might have enjoyed in negotiations with China. And, investors loudly called BS on the latest report of a “very positive phone call.” Two of them, actually. Yeah, that’s the ticket.
Then, just yesterday, ex-Fed President of NY Bill Dudley suggested that the FOMC should avoid any rate cuts that might “bail out an administration that keeps making bad choices on trade policy.” I was astonished — not that Dudley felt this way, but to see it in print.
As long-time readers know, I have expected for quite some time that the global financial establishment, concerned about the uncertainty that four more years of a Trump administration would entail, would temper or even withdraw its “support” from the market since a correction back to November 2016 levels would neutralize some very important bragging rights.
Whether or not you support Trump or believe he’s on the right path with China, the truth is that a great deal of uncertainty has been injected into the market. Markets dislike uncertainty, as do business owners and managers who have to make decisions which could prove disastrous depending on what the next tweet says. All the “adjusted” earnings reports, massaged economic data and other convenient “facts” can’t change that simple truth.
Trump has a difficult choice to make: go to the Chinese, hat in hand, and beg for a deal that will allow him to announce a victory and save face with his base — many of whom have suffered enormously throughout the trade war — or, be prepared for another 14 months of economic water torture.
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Our analog has been eerily accurate over the past month. When it wasn’t, it was because stocks fell short of upside targets and declined more sharply than expected. We should be in the midst of a multi-day bounce after bottoming where expected on Friday. But, yesterday was a struggle. Can the algos produce higher highs?
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