After reaching record highs this past month, volatility set in and we had a few days of losses following the Fed meeting, as well as Trump’s latest Chinese tariff action. But yesterday, markets calmed, regaining some of their losses. Advisor and consumer sentiment remain very bullish, as you’ll see in our Advisor Sentiment Barometer and Market Views.
Wall Street’s Best Investments 820
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Market Views
No Longer Overbought
Technically, the S&P 500 has corrected most of an overbought condition with a 2.73% decline from its July 16 high. News-related volatility will likely continue as the market enters its least favorable season. But, sentiment gauges have begun to improve on a shorter-term basis.
Timer Digest, P.O. Box 1688, Greenwich, CT. 06836-1688, (203) 629-3503, August 5, 2019
Keep Your Powder Dry
Although the 25-basis-point cut in the federal funds rate was widely anticipated, what the market really wanted was for Fed Chair Jerome Powell to signal that this was the beginning of a new rate cut cycle. Well, Powell basically delivered the opposite of that message, indicating that this rate cut was more a “mid-cycle adjustment” than any kind of change in zeitgeist at the central bank.
That disappointment on Wednesday was followed by a surprise dose of trade-related negativity directly from President Trump, who tweeted that the United States would impose 10% tariffs on an additional $300 billion in Chinese goods and products beginning on Sept. 1 after trade talks this week failed to yield any significant results.
That news prompted what you’d expect of markets—a big trade-related sell-off.
Then over the weekend, China took the trade war to another level by devaluing the yuan to fall below its 7-to-1 ratio with the U.S. dollar for the first time in a decade. A weaker yuan is designed to assuage the blow the United States has dealt China via the tariffs.
Given the likelihood of a protracted trade war, it’s no surprise that risk is coming off the table here and that sellers are in control. As of this writing, the Dow was down more than 700 points, or about 2.8%, so far today.
During times like these, it’s important to stay calm, and not make any rash moves.
Mark Skousen, Forecasts & Strategies, www.markskousen.com, Eagle Financial, 300 New Jersey Ave. NW, Suite 500, Washington, D.C. 20001, August 5, 2019
Vix Goes Higher
U.S. stocks had their worst day of the year, extending recent weakness as the U.S.-China trade relationship took another turn for the worse. President Donald Trump accused China of currency manipulation after the yuan fell to its lowest point versus the dollar in a decade, and the Asian nation also reportedly halted crop imports from the U.S. When all was said and done, the Dow was down almost 800 points, bringing its losing streak to five, while the heavy losses for the S&P and Nasdaq brought their losing streaks to six sessions. The VIX, meanwhile, surged to its highest close since early January.
Bernie Schaeffer, Schaeffer’s Investment Research, www.SchaeffersResearch.com, 800-327-8833, August 5, 2019
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