Stocks finished lower in Friday’s US trading session. The Dow fell 0.6%, while the NASDAQ declined 0.8%. Gold prices jumped nearly US$20 an ounce, while Brent crude closed down 0.2% at US$64.28.
Despite the weakness in the major equity indices, stocks remain close to new, all-time highs. There is no sign of recession or concern for risk. The Fed had to pump billions of reserves into the financial system for the first time in a decade. The market yawned.
The major news over the weekend continues to be geopolitical.
First, there is the potential war scenario with Iran. I’ll get to that in a minute.
Then there’s the trade war.
As I’ve said many times, it isn’t going away in a hurry.
Over the weekend, US President Trump said, ‘I’m not looking for a partial deal, I’m looking for a complete deal’, and ‘I don’t think I need it before the election’.
According to the Financial Review:
‘His comments appeared to worsen the standoff.
‘Beijing cancelled at the last minute visits by Chinese delegations to discuss the purchase of US agricultural products, a gesture aimed towards ending the dispute and which the Trump administration had described as an act of “goodwill”.
‘Bloomberg reported that the Montana Farm Bureau Federation was told by the Chinese embassy that a delegation “had an adjustment of their agenda” and they’re headed back to China earlier than planned”.
‘The Nebraska Department of Agriculture also said on the same day Mr Trump spoke that planned visits were cancelled.’
Are you seeing a pattern? When the stock market is at or close to all-time highs, Trump feels he has room to talk tough on China. But when panic sweeps through, he brings out the conciliatory language.
I’m not suggesting Trump’s tough talk is just ‘talk’. The Americans mean business in this trade war. They are negotiating from a position of strength, so they can continue to tighten the screws on China until they get a satisfactory outcome.
But it has to be within limits. Trump has hitched his presidency to the stock market. This is a very risky and dumb move, in my opinion.
It just gives the establishment media, who hate Trump because he isn’t a deep state agent, another reason to attack him.
It means whenever there is a sharp fall in the stock market, Trump will pare back on the trade war aggression. He will also put more pressure on the Federal Reserve to lower rates.
Speaking of the establishment media, Trump has been tweeting up a storm criticising them over the weekend. This is in relation to another false allegation into Supreme Court Justice Brett Kavanaugh, as well as an attempt to turn a Joe Biden scandal in the Ukraine into a Trump scandal.
All efforts fell flat. Trump tweeted…
‘The LameStream Media had a very bad week. They pushed numerous phony stories and got caught, especially The Failing New York Times, which has lost more money over the last 10 years than any paper in history, and The Amazon Washington Post. They are The Enemy of the People!
‘…The Fake News Media nowadays not only doesn’t check for the accuracy of the facts, they knowingly make up the facts. They even make up sources in order to protect their partners, the Democrats. It is so wrong, but they don’t even care anymore. They have gone totally CRAZY!!!!’
Re the Biden Scandal, it’s been known for some time that leading Democrat candidate Joe Biden threatened to withhold money from Ukraine unless the Ukraine prosecutor investigating his son got the sack. That was in his former role as vice president.
But the media tried to spin it as Trump having a dodgy conversation with the Ukraine in trying to get dirt on Biden. A (deep state) ‘whistleblower’ leaked the conversation to the press.
‘The Radical Left Democrats and their Fake News Media partners, headed up again by Little Adam Schiff, and batting Zero for 21 against me, are at it again! They think I may have had a “dicey” conversation with a certain foreign leader based on a “highly partisan” whistleblowers..
‘….statement. Strange that with so many other people hearing or knowing of the perfectly fine and respectful conversation, that they would not have also come forward. Do you know the reason why they did not? Because there was nothing said wrong, it was pitch perfect!’
Why are these leaks happening now?
The deep state is in panic mode over the upcoming release of the inspector general’s report into FISA abuse. A FISA warrant is an approval by the court to spy on US citizens.
I’ll be sure to let you know how that goes when the report is made public.
Getting back to oil and Iran, the establishment media are angling for war. The New York Times (NYT) published an opinion piece last week by Abdulkhaleq Abdulla, ‘a prominent political scientist in the United Arab Emirates’.
‘Trump, in his response to Iran, is even worse than Obama.’
‘Now an Arab Gulf strategic partner has been massively attacked by Iran—which was provoked by Trump, not by us—and we hear Americans saying to us, you need to defend yourselves! It is an utter failure and utter disappointment in this administration.’
Iran is trying to provoke the US into war. And the NYT is giving a voice to those demanding a response from the US.
Unless you have Trump Derangement Syndrome, you’ll know that Trump is not a warmonger. He just sacked John Bolton for goodness sake!!
If you want to know the likelihood of a confrontation with Iran, ignore the media and watch the oil price. The price of Brent crude spiked last week but turned down sharply after hitting resistance (see below).
While it remains under that resistance level, you can rest easy. But if it spikes above there, you’ll know that something is going on.
When it comes to geopolitics, ignore the media. Focus on what the market is saying. Money talks.
Editor, The Rum Rebellion
PS: There’s a BIG surprise coming for the AUD in 2020. Click here to find out what it is (free report)