Mike’s Morning Brief – September 19, 2018

What’s going on in the world…

Market opens in the green after a strong reversal yesterday brought gains to the S&P, which closed back above 2900. The DOW is the leader in early trading while the NAS just went red. Trade remains the focus with China pushing back further on proposed tariffs. The 10% level seems to be key. The Market reaction suggests that a deal could very well get done ahead of the proposed 25% levy which would be implemented in January at the earliest. It is clear who is winning this war on trade thus far with the S&P 500 up 8% on the year while China remains down double digits. President Xi is reportedly feeling the heat and wants a deal, but can’t look weak in doing so. China is in a tight spot. That said, Asian Markets have been in rally mode the last 2 days, supporting the expectations of an ultimate deal. Some people however are floating the idea that this war on trade might last for quite some time, suggesting a cold trade war of sorts. That certainly seems plausible, but I’m not sure the Market is pricing that in. This is fight for digital supremacy, more than anything else, as we head towards 5G. Word is circulating that Canada is feeling pressure to get a trade deal done as well. There was a nuclear deal reached on the Korean peninsula. Brexit talks keep taking place ahead of an important EU summit tonight. Interest rates are on the rise as well, with the 10-Year Treasury yield building on the 3% level it breached yesterday. The Fed is expected to raise rates next week with now an 87% probability of another one in December. Financials are not responding to the higher rates like one would think. That’s something to ponder. Volatility is certainly sticking around. Whipsaw price action has become the norm, with an upward bias. Like a submerged beachball underwater, this Market just won’t stay down.

Have a great morning,

Mike Frazier

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