The market rally that began yesterday when NEC advisor Larry Kudlow said President Trump was not interested in a trade war boosted US stocks and then spread across Europe and continued on to today as the Dow gained another 240 points to close at 24,505. Trading volume on the Dow continues to trend lower however meaning the big institutional investors are cautious.
European exchanges yesterday had their best performance in 2 years as the German, French and British stock exchanges all traded higher by 2% or more. In Asia however the picture was mixed. The Japanese index was up 1.5% while the Hong Kong exchange fell by 2.1% and shares in Shanghai were off slightly. These trends, if they hold, might give credit to the argument that the US is holding all the cards in the trade negotiations with China. Some gurus feel that China has a lot to lose because if a trade war causes their economic engine to sputter it could spark a Sino debt crisis. These gurus are also pointing out that China’s tariff responses are aimed directly at Trump’s base in an effort to exert political pressure on the White House.
BTS issued its latest market insights and their feeling is that both stocks and high yield bonds have found support and while they could rise from here the downside risks remains in sufficient quantity to warrant a continued defensive position. BTS has been in cash since February.
Boeing had a good day. After China proposed slapping a 25% tariff on some US made jets, India’s Jet Airways doubled its prior order of 737 Max airliners boosting the original order from 75 to 150 planes worth $8.78 billion at list prices. The deal also served to underscore the notion that if China tries to punish Boeing in a trade war the jet maker still has other fast growing emerging markets that it can sell to.