Buy the Dip or Something Different?
We ended last week with a positive risk sentiment across the board. The start of this week feels a bit different.
Weaker factory numbers than expected in the U.S, an impeachment process that is moving to the next level in the U.S., rumblings that China wont step in with expansionary measures to help their economy and President Trump, seemingly struggling to achieve a phase 1 deal with China, decided to go after Brazil and Argentina. https://www.bbc.com/news/business-50633500
Rounding out the day with a go at France! https://www.axios.com/trump-tariffs-france-760839cf-9e4e-4f50-bcd7-8dc0a9732669.html
It seems that President Trump told reporters in London that there was no deadline for a deal with China and likes the idea of waiting until after the election for a China deal. https://www.cnbc.com/2019/12/03/trump-says-it-might-be-better-to-wait-until-after-2020-election-for-a-china-deal.html
Not to mention that president Trump continues to attack the Fed for not being aggressive enough on rate cuts even though they have cut .75% and are pumping liquidity into the system at an impressive rate. https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm
The markets are not taking the past couple of days events too poorly, but the markets have been quite spoiled the past months and not used to seeing the global equity markets retrace for more than short periods of time. Should the market continue to be weak into the Friday employment numbers, we could be in for an interesting end of the week.
The iShares IBOXX U.S. High yield bond Fund is holding an important support area. A break will convince us that equities have more work to do on the down side.
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– Mark W