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The Best of What They Said and I Read Week Ending 8/25/2019

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

Barron’s – August 23, 2019 – “The Dow’s Week Turned Ugly After Trump Sparred With China and Powell”  Ben Levisohn

•     “…The fun started on Friday morning, when China announced new tariffs on $75 billion of U.S. goods and a resumption of penalties on U.S. cars. Surprisingly, the market handled it pretty well. U.S. futures markets dipped into the red, but only a bit, and the market appeared ready to shrug off the news, particularly after Powell stuck to his message: The Fed will “act as appropriate to sustain the expansion.” That wasn’t enough for the president. “My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?” he tweeted. From there, he turned his wrath on China and “ordered” U.S. companies to “immediately start looking for an alternative to China.” (Trump later upped the ante by announcing another tariff increase of five percentage points on Chinese goods.)”

•    “Stocks were not thrilled…The Dow Jones Industrial Average slid 623.34 points on Friday, ruining what had been a decent week. The Dow declined 257.11 points, or 1%, to 25,628.90 for the week, while the S&P 500 fell 1.4%, to 2847.11, and the Nasdaq Composite dropped 1.8%, to 7751.77.  Indeed, the stock market is holding up better than might be expected. After Friday’s drop, the S&P 500 sits 5.9% below its all-time high, well above the 10% threshold for a correction. The index didn’t even touch its recent low of 2840.60 reached on Aug. 14, and remains up 13.6% this year.”

U.S. Global Investors - Investor Alert – August 23, 2019 – Frank Holmes 

•     “…Target was the best performing stock for the week, increasing 23.00 percent.…Target beat Wall Street estimates for quarterly same-store sales on Wednesday. The retailer benefited from higher online sales and an increase in shoppers at its stores…”

•    “…The U.S. budget deficit is growing faster than expected and President Trump’s trade war is weighing on the economy, according to a new Congressional Budget Office forecast that highlights key challenges ahead of the 2020 elections. The shortfall is set to widen to $1 trillion by fiscal year 2020, Bloomberg writes, two years earlier than previously estimated, according to the non-partisan group’s annual budget outlook released Wednesday.”

•    “Emerging Europe - Greece was the best performing country this week, gaining 5 percent. Banks bounced back with Piraeus Bank gaining 18.3 percent in the past five days and National Bank of Greece gaining 16.2 percent. After years of economic crisis, Greece continues to apply reforms, restore credibility and attract foreign investments.”

The Kiplinger Letter – August 23, 2019  

•    “…The warning signs are getting stronger. And financial markets are growing nervous. Risks to the economic expansion are rising. But we still don’t think a recession is near. It’s natural to worry about the economy. Bond yields are down…a sign that investors are concerned about the prospects for GDP growth. Yields on long-term bonds have slipped below those on short-term debt…often a sign of recession ahead. Commodity prices are softening...again, a signal that future economic activity will be weak. Manufacturing is contracting in the U.S. and across the world as the trade war continues.” 

•    “Still, there are reasons for some optimism. Most of them hinge on the U.S. consumer. Despite talk of trade wars and manufacturing slumps and possible recession in Europe…all real problems…U.S. consumers continue to shop and spend freely. Unemployment is near a 50-year low. Wages are up. Home values and 401(k) balances are quite high. Shoppers will have to carry the load for now because weak business investment shows no sign of perking up anytime soon…None of this means that all is well with the economy. Growth is slowing after coming in strong last year. There are plenty of problems overseas: Brexit. Weakness across Europe. A sharp slowdown in China. Flagging global trade. The best-case scenario: GDP gains of 2.3% this year and 1.8% next year...far short of recession, but no boom, either.” 

•    “…Tensions will climb with Europe and Japan over the specter of auto tariffs as President Trump keeps the tariff threat alive. The administration agreed in May to a six-month delay on slapping 25% tariffs on imported cars and parts from the European Union and Japan. But Trump says tariffs are “never off the table.” U.S. auto tariffs would have a big effect on global trade. Autos and parts make up 8% of global trade volume. A 25% duty would hike new-car prices by $2,750, on average, and lead to spikes in used-car prices. Germany would take the biggest hit in the EU, as it makes up 55% of EU auto exports and is on the verge of a recession.” 

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