A mixed week with the Dow Jones down 226 points (-0.89%) and the Nasdaq up 101 points (+1.32%)
What was supposed to be the most important week of the year turned out to be a dud. Trump’s meeting with The Rocket Man was nothing more than a photo op, the FED did raise rates on higher inflation expectations, the ECB threatened the end of QE and President Trump launched the next stage of his misguided trade war.
To the latter point, massive trade deficits are a symptom of a cancer stricken economy, not the cause. The real cause is the FED and their insane monetary policies. There are two very important things to consider here when it comes to Trump’s idiotic trade war.
First, trade deficits are great for the stock market. The bigger the deficit the better as it suggests higher levels of economic activity. The more we buy, the higher the earnings.
This has been more true in recent decades at our trade with China has exploded. Just look at the chart above. When our economy collapsed in 2008, so did our trade deficit. And while that was a ‘natural’ correcting, Trump’s attempt at deficit reduction is anything but.
Second, history teaches us that trade wars always escalate and always end bad for all involved. Often turning into hot wars when it is all said and done. Historians and economists still argue that trade wars were the primary cause of the 1929 crash and subsequent depression. Perhaps no one can explain this better than David Stockman
Once again, the real culprit behind nearly all imbalances and ailments associated with the US Economy and Financial markets is the FED.
I once supported President Trump, even voted for the guy, primary for that reason. He clearly identified the stock market bubble and the FED as the main problems with the US Economy during the primary process. Will The Plunge Protection Team Turn On President Trump Unfortunately for all of us Mr. Trump has flipped since then, transforming into some sort of a Jim Cramer want to be stock market cheerleader.
As a result, all is lost.
President Trump is fighting the wrong war and exactly at the wrong time (stock market bubble top). And that will lead to disastrous consequences in short order. If you would like to find out exactly when the stock market craters, based on our mathematical and timing work, please Click Here.
