Markets today were whacked over uncertainty regarding the “new era” of US global trade. At the close the Dow had slumped 724 points to 23,957 on higher trading volume. IBD will most likely go to “market in correction” and BTS indicators remain in cash but are indicating downside bias.
President Trump fired the opening salvo in the remake of US trade relations with global trading partners. The message was 1) reciprocity on trade deals, 2) intellectual property protections and 3) negotiations will play a major role in final decisions as each piece of the puzzle is put into place. An initial list of 1,300 products affected will be released soon and then a comment period by those affected will begin before any final decisions are made. All signs point to this being an ongoing story that will unfold over time and be determined on a case by case basis. One negative to this is that market gurus will have a hard time forecasting the big picture which in turn could inject volatility into the markets. Another negative is the ripple effect on export based economies like Germany that now have to adjust to a new trade reality with the US. This might be a big deal. Call me if you want my views on it.
Timber stocks mostly bucked the market trend and moved higher. Weyerhaeuser recently gave an investor presentation and here are some bullet points of interest. 1) Single family home starts are rising which is key since a single family start uses 3x more wood than a multifamily start. 2) West coast log export demand from Japan and China remains strong 3) Imports from Canada are constrained due to pine beetle kill and tariffs 4) remodel/repair demand for lumber/OSB is strong 5) Industry operating rates currently exceed 90% and more capacity is needed. All is these points support a favorable operating environment for the timber industry.
There is a Boy Scout court of honor tonight. It should be fun. I plan on making an apple pie for the event using a secret baking technique developed from my mom’s well-worn 1962 Betty Crocker cook book.
Call me if you have any questions about the markets.