Mike’s Morning Brief – July 11, 2018

What’s going on in the world…

Market opens sharply lower as the War on Trade continues to gain momentum. Global markets were largely in the red overnight, led by a near 2% decline in China. The US is upping the ante on China again, to the tune of $200 Billion on everything from refrigerators to beauty supplies. The Market is taking this whole issue very much in stride. The recent gains in July have come in the face of such confusing and concerning rhetoric and actions which threaten the global economy. The S&P was pushing up against a pretty substantial resistance level near 2800. That coincides with DOW 25K. Near-term stocks were overbought, and due for a breather. The corrective price action which has been in place for 6 months continues to work its way through. The process is taking longer than expected, but is working. Importantly, strength has rotated within sectors as Tech continues to demonstrate sluggishness while Consumer Discretionary, Energy and now Health Care have taken the baton. This was required for the next stage of the rally or said rally likely faced defeat. It’s working. There appears to be more to come, as long as a full-blown Trade War does not develop, which certainly threatens everything Market related. President Trump is in Brussels for the NATO summit and is talking tough on our allies again. He said Germans are a captive of Russia when it comes to Energy. He has long criticized European nations responsibilities within NATO. But Europeans have increased their contributions finally living up to their obligations in financial support of the North Atlantic Treaty Organization. The American President has seemingly everyone on their heels. That’s the way it’s been in 2018. It’s only halfway done. Where it’s headed is anyone’s guess. The Market does not seem spooked at all, as the US has held up much better than the rest of the world’s stock markets. Crude Oil remains elevated. Interest rates have slipped further. Fundamentally, the US is in great shape. Politically and Socially, there is a massive divide. When headlines focus on Politics and Geopolitics, it tends to bring turbulence. Hang on, the ride’s far from over.

Have a great morning,

Mike Frazier

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