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The Best of What They Said and I Read Week Ending 5/19/2019

Short excerpts from articles I found interesting.  I may not agree with the author and the following material is not intended as investment advice

U.S. Global Investors - Investor Alert – May 16, 2019 – Frank Holmes 

  • “…The major market indices finished mostly down this week. The Dow Jones Industrial Average lost 0.69 percent. The S&P 500 Stock Index fell 0.76 percent, while the Nasdaq Composite fell 1.27 percent. The Russell 2000 small capitalization index lost 2.37 percent this week…The 10-year Treasury bond yield fell 7 basis points to 2.392 percent.”

  • “…U.S. consumer sentiment jumped to a 15-year high in early May amid growing confidence over the economy’s outlook, but much of the surge was recorded before an escalation in the trade war with China. The University of Michigan said its consumer sentiment index increased 5.3 percent to 102.4, the highest reading since 2004…The world’s second largest economy showed more signs of slowing. Retail sales in April out of China grew at their slowest annual pace since May 2003, while industrial output and fixed-asset investment also weakened.”

  •  “…President Donald Trump announced a Friday a delay in imposing tariffs on imported vehicles and parts from the European Union, Japan and other nations for 180 days to pursue negotiations. This avoids opening another front in his tariff battle with some of America’s key allies.”

Barron’s – May 17, 2019 – What Does It Take to Trigger a Stock-Market Selloff, Anyway? – Ben Levison 

  • “…The decision to limit Huawei Technologies’ access to U.S. goods and markets, however, is something more, because it has the potential to disrupt China’s plans during a year when the People’s Republic is celebrating its 70th anniversary, says Carmel Wellso, director of research at Janus Henderson. “People don’t understand how important this is to the population of China,” she says. “We’re striking at something more fundamental.”

  • “…Some chalk up the market’s calm to investors’ ability to ignore what’s happening overseas. “In our view, the reason markets haven’t budged much on worsening China headlines is because America is happy right now and simply doesn’t get it yet,” explains Richard Farr, chief market strategist at Merion Capital Group.”

  • “…Others suggest that a broader battle between the U.S. and China might not be that bad for stocks, at least in the short term. Higher tariffs will probably mean a slight pickup in inflation, while interest rates will almost certainly stay low. In fact, the futures market is predicting a 75% chance that the Federal Reserve will cut rates in 2019. “Low interest rates typically mean good stock markets,” says Janus Henderson’s Wellso.  But what if something has fundamentally changed in the market? Investors have become accustomed to central banks stepping in to bail out the market, as the Fed did in both February 2016 and this past January, explains Macquarie strategist Viktor Shvets, who notes that damage was quickly undone in both cases “as if by magic.”  “There’s no reason to expect that to change, he says, and monetary policy could soon be joined by government spending of epic proportions to keep the economic cycle going. “Investors are complacent because they no longer believe in free markets, and expect any damage from trade wars or politics would be offset by fiscal or monetary tools,” Shvets writes. The scary part is he might be right.”

Barron’s – May 17, 2019 – What China Wants to Avoid in Trade Talks:   Becoming the Next Japan – Randall W. Forsyth

  • “…Despite the clear impediment to near-term economic growth and the stock market, institutional investors appear to support the Trump administration’s trade policy. The CEO of Strategas Research Partners, Jason DeSena Trennert, reports from his institutional clients in Boston (“hardly Trump country”) that “there was a bipartisan feeling that standing up to China was a fight worth having to protect the national security and economic interests of the United States.” China, meanwhile, may have miscalculated in thinking that the partisan divisions within the U.S. would keep the nation from presenting a united front in the trade war.”

  • “…To quote the biggest hit of Doris Day, who died this past week at the age of 97, whatever will be, will be. Rarely has the future been less certain, which is reflected in the divergence between the stock and bond markets…Que será, será.” 

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