Mike’s Morning Brief – October 9, 2019

What’s going on in the world…

Market opens higher on new optimism of a trade deal. This is a complete 180 from yesterday, which sent stocks sharply lower because the prospects of a deal keep shrinking. And they’re shrinking from an already low number in my estimation. But both parties have made it clear they are not budging on the most critical issues. China already announced they could cut their trip short by a day after the US slapped visa restrictions on Chinese citizens suspected of racial abuse. This came after blacklisting a number of Chinese companies from doing business in the US. Both occurred just days ahead of tomorrow’s scheduled meetings in Washington. It does not set up a very collegial start. But both nations are nowhere near a deal, and neither seems willing to cave on the most important issues, which apply to intellectual property and government backing. Reuters reports that China is planning visa restrictions for US nationals with ties to anti-China groups. But apparently, China is willing to buy more soybeans, which has the DOW and S&P higher in early trading, erasing half of yesterday’s losses. Asian stocks dropped the most in a week overnight as the US-China dispute over trade and foreign policy continued its escalation. Tensions are even being felt between the National Basketball Association and China, as politics are seemingly playing roles throughout commerce and social sciences. Major challenges continue overseas. Brexit keeps getting more complicated with the Halloween deadline looming. Prime Minister Boris Johnson is facing an all-out rebellion in his cabinet. Turkey announced it is beginning its surge across its southern border into Syria where the Kurds occupy. This is a really big deal which has massive implications for safety and stability in the Middle East. The Kurds were one of our most strategic allies in the fight against ISIS. Turkey considers them terrorists. President Trump announced the removal of American troops in the region. This has created a major controversy in Congress and throughout the western world. Some of Trump’s greatest supporters, including Lindsey Graham and Mitch McConnell, have voiced their objections. Impeachment is still the main theme in Washington. The White House said yesterday afternoon it would not cooperate with House inquiry, setting the course for an actual impeachment. Latest polls showed a majority of Americans support the inquiry, but most think Trump should remain in office. This is going to be an issue throughout this combative 2020 campaign. American division keeps widening, and whatever people thought going in, feel stronger and stronger with their beliefs and perspective. The world is a very dangerous and confusing place. That’s really been the case from day 1, but the way information travels and the tone in which it is disseminated seems to make things much more difficult. So for now, stocks are up and Bonds are down. Yields are rising. The Dollar is falling. Oil is up while Gold is down. It’s a risk-on day. But those haven’t lasted long of late. The US Stock Market has basically gone sideways for nearly two years, with wide ranges of volatility. And how about this: The S&P 500 closed yesterday, 10/8/19, at 2893. It closed a year ago, 10/8/18, at 2884. It’s basically at the same place. This is late cycle action in the face of so many risks and headwinds. We remain defensively positioned.

Have a great morning,

Mike Frazier