The 'Trade War' Takes Another Wild Turn
The 'trade war' takes another wild turn... What the 'big picture' tells us now... The bull market is still on, but the pullback has begun... A reminder to 'not freak out'... Our most popular offer of 2019 is back...
We begin today with yet another instance of 'headline volatility'...
The benchmark S&P 500 Index and Dow Jones Industrial Average each slipped more than 1% this morning following the latest developments in the U.S.-China "trade war"...
Speaking to reporters earlier today in London, President Donald Trump said that he might hold off on making a deal with China until after the 2020 presidential election.
Then, later in the day, reacting to the market's reaction to his comments, Trump called the slide in the major U.S. indexes "peanuts" compared with the benefits a trade deal would bring.
As we know by now, when Trump speaks or tweets, the markets listen... maybe even more in this instance, given the hourslong head start his comments had on the U.S. trading day.
This morning, Stansberry NewsWire editor C. Scott Garliss detailed the latest developments. He wrote to his NewsWire readers shortly after the U.S. markets opened about what the news means for investors...
These actions are concerning the markets that "tariff man" is back. That is the moniker Trump gave himself last fall when the trade fight with China kicked into high gear.
At that time, the administration began imposing a series of levies on Chinese imports. Beijing responded in kind and the S&P 500 Index proceeded to sell off 20% on growth worries.
It's also worth noting that Trump has said before that if China holds out until after the elections and he wins, the terms will be much worse. There is no reason to believe that position has changed.
In the short term, it appears the trade war is back in full swing – again...
I (Corey McLaughlin) am not even confident a "phase one" agreement will happen by the upcoming December 15 deadline, as was previously indicated weeks ago by the two sides.
Things are far from over. We expect to see much more "headline volatility" on the topic...
The presidential election is still 11 months away. And in recent days alone, we've seen tensions in negotiations between the world's two largest economies escalate another few notches...
Yesterday, for instance, Chinese state-run media said the country's government would soon publish a dubious-sounding U.S. "unreliable entities" list... This is essentially a blacklist that could lead to sanctions against specific American companies that "severely damaged the legitimate interests" of Chinese firms, according to the Chinese government.
We don't know exactly which U.S. companies are targets, but it stands to reason trade-vulnerable companies like tech giant Apple (AAPL), construction-equipment maker Caterpillar (CAT), and American conglomerate 3M (MMM), which led the drop in the major indexes today, could be impacted.
Also, the U.S. is opening other trade-war fronts... Today's turn comes a day after the U.S. threatened $2.4 billion in tariffs on French goods and announced surprise tariffs on Brazilian and Argentine steel and aluminum.
As Scott told NewsWire readers, the main takeaway is that all this could weigh on U.S. and global stocks if companies around the world become hesitant again to proceed with regular business.
Recently, business data had started to look positive, as it seemed like some form of deal between the U.S. and China was likely... That expectation is turned on its head now.
Zooming out to the 'big picture,' we find a different story...
Despite the renewed trade-war uncertainty and other recession fears, an overall bullish trend is still in place, according to DailyWealth Trader editors Ben Morris and Drew McDonnell.
On the first trading day of every month, Ben and Drew do a "sector check-up" for DailyWealth Trader subscribers. They zoom out for a look at the S&P 500's 11 major sectors over one- and six-month time frames to help guide their trades in the coming months.
Ben and Drew's message yesterday, before the latest trade-war kerfuffle, was clear: The bull market is on, but the market was vulnerable to a pullback.
And today, just one day later, what was their message to subscribers?
The bull market is still on, but the pullback has begun...
And according to Ben and Drew, the next few days might hurt.
In yesterday's DailyWealth Trader, they laid the groundwork for their thesis...
Ben and Drew explained that over the last month, weakness in traditionally defensive (or "risk off") sectors – like utilities, real estate, and consumer staples – along with strength in the more aggressive (or "risk on") sectors – like health care and information-technology – were bullish signs for the markets overall.
This trend, in fact, has been in place for the past six months...
Check out this chart that Ben and Drew shared, showing the performance of the major S&P 500 sector indexes since the start of June. It has a distinct risk-on flavor...
This distribution is an indicator of a bull market. But anyone who has ever heard the boilerplate disclaimer "past performance is no guarantee of future results" knows that it remains to be seen exactly how long this trend will continue...
And you may remember that our colleague Justin Brill highlighted why the next correction could be around the corner in the November 18 Digest...
Justin shared a number of signals of a "frothy" market, including our proprietary "Stansberry Complacency Indicator" and the Chicago Board Options Exchange's put/call ratio – which gauges bullish bets relative to bearish bets. It was at a level not seen since January 2018, just before the S&P 500 plunged more than 10% in February.
In DailyWealth Trader, Ben and Drew use a combination of technical, fundamental, and sentiment analysis. And for nearly a month, they've warned subscribers of a potential pullback...
So today, it didn't surprise us to read a reminder to 'not freak out'...
If today is the start of the pullback we've warned about, Ben and Drew said they expect as much as a 5% drop in the S&P 500, according to their indicators.
Even still, they preached patience as the S&P 500 sold off throughout the morning. From the issue...
Today's going to hurt. And tomorrow might, too...
When your brokerage account balance is at or near new highs, then it drops, it doesn't feel good.
"Maybe I should sell now and lock in my gains," you think. "Maybe this is the big one, and I can get out near the top."
Maybe... But we advise against it. Those are your emotions at work... And trading on your emotions is never a good idea.
In fairness to DailyWealth Trader subscribers, we can't share all of Ben and Drew's instructions and the key levels they see in the major indexes right now. But if you're not already a subscriber, we urge you to consider signing up today...
They provide all kinds of fantastic market insights, big-picture perspective, and short-term guidance and trading ideas delivered straight to your inbox every day. (Your Digest author today sits across from them in the office... and I can say they're good neighbors, too.)
Click here to learn more about a subscription to DailyWealth Trader.
Finally, a reminder that we've reopened our most popular offer of 2019 – with a twist...
Regular Digest readers might remember the story of Rob Lamoureux, the paid-up Stansberry Research subscriber who retired at age 52 with the help of the unique investment vehicle – corporate bonds – that our own Mike DiBiase wrote about yesterday.
Rob gained his financial freedom in part because of the strategy that Mike uses in our Stansberry's Credit Opportunities service. So we agreed to offer access to this research at an all-time-low price that's half of what we normally charge for one year.
But for this week only, we're doing something even better...
In addition to getting instant access to Stansberry's Credit Opportunities at a 50% discount, you'll also get a "holiday bonus" valued at $1,200 and thrown in at no additional cost. Click here to take advantage of this special offer before it expires on Friday at midnight Eastern time.
New 52-week highs (as of 12/2/19): Bausch Health (BHC), Hologic (HOLX), Pan American Silver (PAAS), and Flutter Entertainment (PDYPY).
Another quiet day in the mailbag. We'd love to hear your thoughts about the U.S.-China trade war. Drop us a line at feedback@stansberryresearch.com.
Regards,
Corey McLaughlin
Baltimore, Maryland
December 3, 2019