Mike’s Morning Brief – October 2, 2019

What’s going on in the world…

Market opens lower as October has brought red back to the screen for stocks. There was a 50-point reversal on the S&P yesterday, from high to lows. The index closed near the lows. That translates to nearly 500 points on the DOW. I was actually more surprised that they were up so much in the morning. A sell-off is in place. The S&P closed below its 50 Day Moving Average, something that many investors will be watching and considering a Bearish move. Our response continues to be the cycle is slowing. Central banks have been propping up the Market as demand for American assets has been quite strong. The US is in better shape than the rest of the world. But American immunity is not permanent. Stock prices don’t go to the sky. The ISM number reported yesterday came in at 47.8, the worst since 2009, in the heart of the Financial Crisis. The slowdown seems to be accelerating. The Trade War has simply accelerated the inevitable. We remain on defense, protecting our portfolios and focused on preserving capital. Global Markets were largely lower overnight. China continues to celebrate its People’s Republic. People in Hong Kong are not celebrating. They’re protesting. In an escalation of violence, Hong Kong police yesterday shot a teenage protester, the first to be hit by live ammunition in almost four months of unrest in the Chinese-ruled city. British Prime Minister Boris Johnson is presenting his final Brexit offer to the European Union. It’s called the “two borders for four years” plan. Northern Ireland would be a temporary regime and there would be a border in the Irish Sea. It doesn’t seem very likely to pass. Where this goes next, nobody seems to know. Brexit risks continue to pressure the European economy, which pressures the Global economy. President Trump switched his language from impeachment to a coup attempt. The situation in Washington is getting very messy and very dangerous. Secretary of State Mike Pompeo reportedly admitted to being on the Ukraine call in question with the President. Stocks are lower. Interest rates are lower. Oil is lower. The Dollar is higher. Bonds are higher. Gold is higher. The VIX is higher. It’s a risk-off day. Over the past two decades, October has been the second-best month of the year for the S&P 500. However, since 1983, the index has averaged a decline of 1.2% in October when it has climbed more than 10% in the first three quarters of the year. The S&P was up over 10% through September. Hang on tight and keep those belts buckled.

Have a great morning,

Mike Frazier