The 'Trade War' Is Back
The 'Trade War' is back… Trump tweets roil the markets… Our proprietary Complacency Indicator is flashing again… It's time to prepare for the next bear market…
The 'trade war' is suddenly making headlines again...
U.S. stocks opened sharply lower this morning following a pair of weekend "tweets" from President Donald Trump. As the Wall Street Journal reported last night...
President Trump threatened to drastically ramp up U.S. tariffs on Chinese imports, a surprise twist that put an accord in doubt as Beijing considered pulling out of talks scheduled to begin this week.
In a pair of Twitter messages Sunday, Mr. Trump wrote he planned to raise levies on $200 billion in Chinese imports to 25% starting Friday, from 10% currently. He also wrote he would impose 25% tariffs "shortly" on $325 billion in Chinese goods that haven't yet been taxed.
"The Trade Deal with China continues, but too slowly, as they attempt to renegotiate," the president tweeted. "No!"
For weeks now, the White House has told us again and again that trade talks were going well...
In fact, the latest reports suggested a deal could be reached as early as this week.
As a result, Trump's tweets took many folks by surprise... including, apparently, the Chinese government itself. According to the Journal, China is now considering canceling the latest round of talks that were set to resume on Wednesday.
Now, there's no reason to worry just yet...
As our colleague John Gillin noted on the Stansberry NewsWire this morning, these threats are most likely a negotiation tactic meant to incentivize a deal more quickly. He doubts the White House would allow talks to collapse after so many months of hard work.
We certainly hope that's the case. But this situation is still concerning.
U.S. stocks have run nearly straight up for the past four months. Today's sharp sell-off suggests rising hopes of a trade deal have been a big reason why.
If the White House miscalculates and China walks away from a deal, stocks could move significantly lower in a hurry.
Of course, trade deal or not, the market can't keep up this remarkable pace forever...
Sooner or later, stocks will suffer another correction. And as we've noted over the past several weeks, a number of potential warning signs are beginning to flash.
For example, we've noted that several measures of investor sentiment have matched or exceeded the bullish extremes reached at the market's peak last fall.
We've shown you that important sectors like financials and small-cap stocks have been lagging the market.
We've also warned that investors were piling into the dangerous "short vol" trade once again.
Today, we'll add one more...
After moving higher for the past several months, our proprietary Complacency Indicator plunged again this month. As our colleague Alan Gula noted in the May issue of Stansberry's Investment Advisory, published on Friday...
"Be fearful when others are greedy." It's one of the most famous quotes from legendary investor and Berkshire Hathaway Chairman and CEO Warren Buffett. He wrote those words in the company's 2004 shareholder letter.
They couldn't be more true today. Both the S&P 500 and the tech-heavy Nasdaq Composite Index broke through to new all-time highs last month. Investors have long forgotten the December market correction.
Today, greed and complacency are rampant.
Our complacency indicator is giving us its lowest reading ever (that includes our back test of 30 years of data). The complacency score dropped to six this month. Remember, any score below 30 indicates investors are complacent.
We're extremely cautious, despite the record highs.
Yes, you read that correctly...
According to our indicator, investors aren't just complacent today... They're more complacent than they've ever been in the past 30 years, including the peak of the dot-com bubble. The following chart puts this extreme in perspective...
To be clear, not every indicator we follow is sending a warning today...
Other reliable measures – such as the yield curve we've discussed in these pages – continue to give the "all clear."
In short, a sharp correction could begin at any time. But for now, the evidence suggests it will be just that... another correction in an ongoing bull market, rather than the start of a serious bear market.
But this doesn't mean you should get complacent, too.
Sooner or later, this bull market will end. And even Steve Sjuggerud admits the bear market that follows could be one for the ages.
The best time to start preparing for this crisis is before it begins. If you wait until the crash is underway, it will already be too late.
This is why we're holding our first-ever Bear Market Survival Event next week. On Wednesday, May 15 at 8 p.m. Eastern time, Porter and investing legend Jim Rogers will sit down to share the simple steps you can take today to protect and grow your wealth – before, during, and after the next bear market.
This is event is absolutely free for Stansberry Research readers. Simply click here to reserve your spot now.
New 52-week highs (as of 5/3/19): American Express (AXP), Blackstone Mortgage Trust (BXMT), Celgene (CELG), Hannon Armstrong Sustainable Infrastructure Capital (HASI), Ingersoll Rand (IR), KLA-Tencor (KLAC), MarketAxess (MKTX), NetEase (NTES), Starbucks (SBUX), SPDR S&P Dividend Fund (SDY), T-Mobile (TMUS), Vanguard S&P 500 Fund (VOO), and W.R. Berkley (WRB).
In today's mailbag: Several readers weigh in on Porter's latest Friday Digest "rant"... and another has a question about the coming bear market. As always, send your notes to feedback@stansberryresearch.com.
"Porter, I actually think your Stansberry's Credit Opportunities product is an exceptional service, not sexy, but VERY profitable. Bonds are actually easy to purchase. I was skeptical at first because I have an institutional fixed income background and always thought the bond market is not retail-friendly. Certainly, the bid/ask spread is much wider for retail; but this is not a service that anticipates frequent trading.
"My only 'nit' is that the prices do pop after a recommendation, so it takes patience for the price to come back in the recommended range. If it doesn't, well there will be other opportunities. Patience and discipline are critical!
"When the fixed income market does crack, with the state of illiquidity from years past, there will be a plethora of opportunities as perfectly sound bonds get oversold. I will bid my time until the worm turns. Keep up the great research.
"As an aside, God bless you recognized you needed to make radical changes in your lifestyle and are taking care of yourself. Be well my friend." – Paid-up Stansberry Alliance member Mike O.
"Hi Porter, I just want you to know that your corporate bond advice doesn't always fall on deaf ears. When you first started this service... I had no idea how to buy a bond. But I turned in my computer and went for it.
"I have to tell everyone reading this, it just isn't that hard! Sure, it is slightly different, but you hold our hand all the way. I usually invest with either Fidelity or Schwab. Fidelity is a little better and more often has inventory of the bonds you recommend.
"You are right, they don't make it easy. And, when I first started calling them they would sometimes try to talk me out of it. But, once you actually sound like you know what you are talking about, that goes away. They no longer try to talk you out of it and just work with you.
"People, you need to do this. The money just rolls in. Does it work perfectly every time? No. Back when Mike [Williams] was the senior analyst, several companies went bankrupt and I lost virtually all of the funds invested in them. Very little was returned. So, just as in stock investing, be careful of position sizing." – Paid-up subscriber Dave H.
"Since Mike is saying we are on the precipice of another [credit crisis,] is there a list anywhere on Stansberry portal of the companies that are at MOST Risk of having their credit/loans stopped? This would be a great help... Thoughts? Would love a list to avoid." – Paid-up subscriber John T.
Brill comment: As part of our upcoming Bear Market Survival Event, we've prepared a special report highlighting the 10 stocks we believe are most at risk in the coming crisis. You can get a FREE copy of this report – titled "The 10 Most Dangerous Stocks in America Today" – in two simple steps:
First, reserve your spot to next week's event right here. Second, when you receive your registration confirmation e-mail, simply click the link to sign up for our complimentary VIP reminder service. You'll then see a link to download your free report.
Regards,
Justin Brill
Baltimore, Maryland
May 6, 2019