I will be out of the office for the next couple of days, so our next daily mail will be on Monday the 20th of May.
For those that follow the Trump administrations actions to reduce the goods trade deficit, you may remember that we have had three major previous rounds of actions based on national security.
- Solar panels and washing machines
- Steel and aluminum
- Latest on the radar is auto and auto parts as a national security threat all of previous actions have unleashed retaliation on some level
In addition there is a strong focus on unfair trade practices for technology and intellectual property.
It is generally agreed for both the Democrats and Republicans that China needs to change their ways. There is less broad support for engaging other allies such as Canada and the European Union. The Trump actions are starting to make things uncomfortable for elected officials from areas that are suffering due to the above actions. The Chinese are sourcing grains from other countries and certain companies such as Ford and Boeing are among those complaining that their costs are rising. Consumers are seeing their costs for certain goods rise as well.
Good overview of China/U.S. trade developments:
We feel that with the uncertainty in trade, ever increasing global debt levels, slower economic growth, countries from Australia and China to members of The EU are all showing signs of weaker growth. The current estimate for Q2 GDP growth is under 1,5% in the U.S. Add in the current unrest in The Middle East (U.S. sending warships to middle east and today the U.S. decided to pull all not essential staff from its embassy and consulate in Iraq due to rising tensions with Iran).
We question the ability for global equities to rally in an environment full of uncertainty and the tradeable bounce we were looking for on Monday will most likely have run its course today.
Another chart we are watching closely is the USDCNH, a break above 7.00 would signal a change in tactics from China. Letting currency weaken to compensate for increased tariffs would be an escalation of the conflict in our eyes. Something most analysts agree China wont resort to.
|Ticker||Date Opened||Entry Price||Stop||Target Price||Current Price||% Change|
|Long Call Option XAUUSD||18/03||13.09||0.00||-100,00%|
|Short Call Option XAUUSD||18/03||5.11||0.96||+81,21%|
|Long DNO CFD||13/05||16.90||16.25||18.00||16.81||-0,53%|
– Mark W