Stocks fell Tuesday over Italian/EU fears then rebounded yesterday when they realized that Italy is small potatoes. Today it was all about renewed trade war tariff concerns. This back and forth trading action has been in place since the first of February and shows no sign of ending. At the close of business today the Dow was off 251 at 24,415 on heavier volume. The markets are still in rally mode according to BTS and IBD. For the month of May the Dow was essentially flat and for the year is up about 0.03%. Meanwhile the tech heavy NASDAQ is up almost 8% thanks to big gains in Amazon, Facebook, Twitter, Microsoft and Netflix.
Morgan Stanley CEO James “Big Jim” Gorman was interviewed on Bloomberg and his take on the global economy was interesting. He sees a trend of global populism with occasional explosions of political uncertainty but this pales in comparison to the strong fundamentals being driven by the US and strength in major economies like China and Japan. His gut feel is that it’s ridiculous to think that Europe will break apart because of Italy and that in the US, interest rates will rise to the 3% to 4% range on the 10 year Treasury. You can check out the interview on our Facebook page.
Wilbur Ross said the Trump administration has ended delays on imposing steel and aluminum tariffs of 25% and 10% respectively on Canada, Mexico and the EU. The tariffs had been delayed pending negotiations but apparently the Donald wants things to move along quicker and so signed a proclamation ending the delay. Canada fired back as did Mexico and the EU will take the case to the WTO. How this affects NAFTA negations is another piece of the puzzle. Some raw material suppliers are holding back on sales to US companies for fear of tariffs being put on retroactively. This issue seems to change day by day so I have taken the stance of “wait and see”. As long as strong economic fundamentals remain in place it pays to avoid being shaken out by the ever changing and constantly blaring headlines.