Alchanati Campbell & Associates
The US either has relationship problems and needs to seek couples therapy or it has anger management issues because it is mad at the world! Sparking a trade war with China (“China devotes to fight to the end”), imposing sanctions on Russian tycoons and allies of Vladimir Putin, childish tantrums against Amazon on Twitter, multiple rate hikes this year… let me refer you to my therapist.
S&P500: (-2.19%) Dow: (-2.34%) Nasdaq: (-2.28%) Russell: (-1.92%) 10 Year: (-2.01%) Oil: (-2.50%) Gold: (0.66%).
The Market. That sense of stability that seemed to be poking its head when Larry Kudlow spoke earlier this week is all but vanished. In the blood bath that was April 6th, there wasn’t much left standing. The 3 major indexes were down by over 200 basis points. As a result, the yield for the 10 year treasury bond also was driven down approximately 200 basis points. Remember, bond yield moves inversely to bond price. As equities were taking a beating, investors moved toward debt investments. This caused the price of the bond to go up, which then led to a decrease in yield. Trump unleashed the most recent $100 billion wave of tariff threats to China last night, which only stirred the pot that Kudlow tried to settle earlier this week. China responded by lacing up their figurative boots.
The Tension. Today, President Donald Trump sent the markets into a spiral. Thursday night, the president seemed poised to continue escalating trade tension with China. The White House said that Trump was considering a $100 billion tariff on more Chinese goods. In a statement, Chinese officials threatened to retaliate if Trump's new tariff were to be imposed. Investors may bearish because of the increased cost the tariffs cause for business owners. Many US businesses rely on Chinese products and supply chains to keep costs down. The Beer Institute claims that the 10% aluminum tariff would add $350 million dollars of extra cost to American brewers. Whether for good or for bad, markets look more and more bearish as Trump and China continue to beef. Because China is more of an exporter than an importer and because of the trade surplus China has with the US (China can not impose any more tariffs on the US because they only imported $131 billion in US goods last year and the US announced imposing $150 billion in new tariffs; 150 > 131) Chinese authorities can consider selling a large holding of US Treasuries or limit further access of US companies to Chinese markets. Goldman Sachs recommends buying shares of companies with large domestic sales exposure.
Something to keep an eye on. The Philadelphia Semiconductor Index ($SOX), which attempts to track the semiconductor industry, fell 3.06% today. This can be attributed to fact that, as a whole, approximately 25% of semiconductor industry revenue is from business with China. We don’t need to spell out what could happen should these steep tariffs go into effect without negotiation. The Nonfarm Payroll came out today, which is essentially a more broad measure of unemployment. The results were below estimates, but not necessarily concerning. In March, the U.S. added approximately 103,000 jobs compared to analyst's expectation of 185,000. The unemployment came in at 4.1%, which is consistent with the past few months. Also, the Department of Labor revised their estimates for January and February jobs, with positive and negative corrections. The net change was approximately 50,000 jobs. While this puts our economy at a weaker level than expected, it is not cause for change in regards to the Federal Reserve's anticipated rate hikes. Jerome Powell, Chairman of the Fed, stated that his view of the economy hasn’t changed much with all that’s been going on lately. In regards to the potential trade war, Mr. Powell feels that it is too soon to know how the tension would impact our economy. However, Mr. Powell does know that the Fed needs to keep raising interest rates as expected in order to fight off inflation. The confirmation of more rate hikes this year undoubtedly had a hand in driving the markets down.
Shorting. You’ve undoubtedly heard the someone say "I'm long on XYZ." Being long on something basically means that you think it is going to go up in price. So, if I'm long on a certain stock, I am probably going to invest in that stock. On the other hand, there is shorting. In case the antonyms don’t give it away, being short on something means you think it is going to go down. With all the turmoil in the markets at the moment, some people may think about shorting. There are a few ways to do this:
*This is NOT investment advice. This is simply information on how to bet against the market. But you already know that.
It’s over with confidence. A study proves how a little learning can turn cautious and conscious decision making into confidence that over exceeds accuracy. Knowing very slim amounts of data might cause you to form quick and self-assured ideas. But with increased experience, overconfidence declines. Personal finance can be an example of this. With primary and secondary schools not teaching the basics of financial literacy, people learn by trial and error. As young adolescences age, overconfidence and financial illiteracy decrease.
Your daily dose of sports. Elgin Baylor, who was the "Kobe before Kobe" as the Los Angeles Lakers head coach Luke Walton put it, is finally getting honored with his own statue outside the Staples center, he will be joining lakers legends Magic Johnson, Kareem Abdul-Jabbar, Jerry West, Shaquille O'Neal, legendary announcer Chick Hearn. Baylor, 83, played 14 seasons for the Lakers both in Minneapolis and in L.A. In the world of golf, that guy from Stanford, four-time green jacket winner Tiger Woods, is making his first Masters appearance since 2015, he's currently tied for 41st place; Woods had been listed as the betting favorite at 9/1 odds of winning it all pre-tournament. To the NFL we go, the LA Rams making some serious off season moves, vamping up their already elite offense who tied the Pats last season with 28.9 points per game for second place behind the super bowl winning eagles. Some of their most notable moves have been the additions of Brandon Cooks WR and Ndamukong Suh DT. Finishing on top of the NFC West with an 11-5 record, the Rams look for another playoff run next season.
The Alchanati Campbell and Associates Team
WHAT'S UP FRIDAY? is a weekly newsletter that will give you a summary of "What's up?" on Wall Street, in the US and around the World written by The Alchanati Campbell and Associates Team. What makes us unique is we focus on long-term knowledge; knowledge that will still be useful to you 10 years from now.