Yesterday, the stock market bounced around to every headline from Brexit to trade negotiations.
Those issues remain unresolved. The general feeling is there will be a resolution or steps that quill anxiety until there is a conclusion. On that note, Wall Street doesn’t care much about what the final resolutions are, and in fact, prefer business as usual.
Main Street US & UK want deals that are fairer for people, and not only reaffirm national sovereignty, but add a greater sense of military and economic security.
I keep saying, the main point, at the very least, is to make China do it under the cloak of darkness instead of in broad daylight. There are so many white-flag waving American commentators that believe China is invincible and can allow their economy to drift for one hundred years. But there are growing signs of economic stress that’s getting worse, including nonperforming loans at China’s banks.
Then there’s the question of household wealth and debt. Household debt in China is rising quickly. According to Credit Suisse, in one-year, China household debt surged 23% while US household debt only edged up 4.2%.
Global Household Economic Trends Sept 2017 to Sept 2018 | Household Wealth | Increase Total Household Debt | Percentage Change |
United States | $391,690 | $677 billion | +4.2% |
China | $47,810 | $942 billion | +22.7% |
Europe | $144,903 | $782 billion | +5.9% |
Asia | $48,119 | $578 billion | +6.6% |
World | $63,100 | $3.1 trillion | +7.15 |
It won’t happen overnight, but there will be a deal with China, and it will favor America.
Wild Ride
It was another wild session yesterday that saw the Dow Jones Industrial Average in an almost 500-point trading range. Chartist might like that reverse head and shoulders formation (there is the same formation on the three month chart of the Dow and S&P).
Although I think most would like to see a re-test of recent lows, (Dow 24,442 and S&P 2,641) I’m not convinced that must happen. But bias is to the downside, and selling triggers are exacerbated by the machines and algorithms.
Dow Jones Industrial Average
Where’s the Fed
Although Jay Powell didn’t completely walk back his October 3 bombshell, the Fed Chairman was confident and upbeat about the economy growing, and even gaining strength.
He acknowledged enough economic headwinds and vulnerable parts of the economy, including the housing market, which suggests the Fed understands this strong economy has its fragile areas that would become worse with aggressive rate hikes.
Fed Rate Hike Probability | Current | Week Ago | Range |
Jan | 2.9% | 4.9% | 2.50 to 2.75 |
Mar | 42.8% | 53.8% | |
May | 43.0% | 52.0% | |
Jun | 42.0% | 42.0% | |
Jul | 23.0% | 33.0% | 2.75 to 3.00 |
Sep | 27.3% | 35.0% |
Today’s Session
Right now, a spat of earnings misses is pressuring the market. Nvidia (NVDA), which was vying to become one of the most important names in technology, laid an egg yesterday with a big earnings miss. I lost track on the number of downgrades this morning. The stock will open much lower and drag technology down as well.
High end retail is vulnerable with the miss from William Sonoma (NSM) and Nordstrom’s (JWM), but Shoe Carnival (SCVL) will soar today.
The Dow is looking down about 200 points in the premarket. I like yesterday's close. Let's see if there is any resolve.
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