“We’re putting the trade war on hold!” With those words, Mr. Mnuchin put a stamp on everything we have been saying on tv and radio as well as in this column. There’s no stinking trade war. Very simply, these people are not idiots. Well….? Let’s just say at the very least, they probably took a couple of weeks to realize how idiotic tariffs are as well as realizing the Chinese would not blink too much. If they mention again, do not believe a word as it is getting close to the very important mid-terms…and I guarantee you that is all they are thinking about.
Rest assured, after a constructive pullback week, we gather the market will pop on the news, at least in the short term. But we stick with our recent thoughts:
Most indices remain range-bound.
The RUSSELL is in new highs. The NASDAQ/NDX is not as good but better than the DOW/S&P, which are bringing up the rear.
OILS/ENERGY continue to be the big strength but again, very extended and overbought.
BONDS continue the ugly as rates back up. No coincidence that the most interest rate sensitive areas continue lower. (Housing, real estate, utilities)
Because of the higher oil, two of the worst areas are airlines and cruise lines. Again, no coincidence.
Emerging markets act poorly as Brazil and Argentina are basket cases. Other countries are also weak.
We love that so many big growth names are just sitting mostly tight after good moves. They may need some more time.
BIG FINANCIALS…still not happening.
SEMIS…did not like that AMAT reaction. As always, important group to be watched.
We suspect the DOW/S&P will remain range-bound while the NASDAQ/NDX having a chance to follow the RUSSELL as a few mega-cap names have major influence. We also suspect the harsh economic rhetoric will get less harsh as we head towards and get closer to November.