Stocks Start September Slowly As Trade Wars Widen, Currencies Collapse In Emerging Markets

The late-summer rally that saw fresh record highs on the NASDAQ and S&P, adding 1600 points to the Dow Jones Industrial Average, may be coming to an abrupt end in September.

As the dollar has soared against emerging market currencies, US markets have become a favorite of foreign money, lifting individual stocks and entire indices from already-high valuations. However, blowback from collapsing economies in emerging markets such and Turkey, Argentina, Indonesia, Brazil, India, and China may become severe if market participants decide its time to repatriate their gains.

With President Trump on a tariff crusade, imports from foreign shores are rapidly becoming less valuable to the source exporters and governments are taking note of the erosion in not just their currencies but in their trade balances.

Stock markets in South American countries are being wrecked, with Argentina and Brazil already in bear markets. Exchanges in Japan, China, and most of Europe - especially the powerhouse Dax of Germany - are already in correction territory and not far from becoming full-blown panicked bear markets.

Thus far, the US has been the beneficiary of other nations' pain, but, there's no free lunch and companies with heavy investment outside the US may soonest profits declining in what were recently solid, growing markets for their goods and services.

How the combination of trade warfare and declining currency valuations will play out may prove to be disastrous to all participants. A great decline in international trade was partially responsible for the global Great Depression of the 1930s. History may soon be repeating if countries don't heed the warnings from prior episodes of trade antagonism.

Casualties are beginning to mount with the precious metals complex already heading past the correction phase and closer to bear market conditions. Gold has been trading in the $1190 per troy ounce range after reaching close to $1360 in March. Silver has collapsed from from a high above $18/ounce to $14.15 at the close on Tuesday. That is already in a bear market.

Reminiscent of September 2008, when investors dumped gold and silver holdings to meet margin requirements and governments scrambled to meet current obligations, the precious metals decline may be a harbinger of things to come for the broader markets.

Insofar as US stocks have performed brilliantly since the brief February correction, there exists a danger that stocks have reached a climax and are overdue for a massive selloff.

Speculation and conjecture being worth exactly nothing until real money is put into play, market participants may soon find out just how far a rally can go before everyone runs for the exits at once, desiring to not be left holding a bag half full.

Tuesday, the first trading day of September started with a steep decline at the open. Stocks gained ground gradually throughout the session, eventually posting minor losses. It could have been worse and it's likely not yet over. The rest of the week and the weeks heading toward the next FOMC meeting on September 25 and 26 will be volatile and potentially damaging to heavily-leveraged, diverse portfolios.

Dow Jones Industrial Average September Scorecard:

Date	Close	Gain/Loss	Cum. G/L
9/4/18	25,952.48	-12.34	-12.34

At the Close, Tuesday, September 4, 2018:
Dow Jones Industrial Average: 25,952.48, -12.34 (-0.05%)
NASDAQ: 8,091.25, -18.29 (-0.23%)
S&P 500: 2,896.72, -4.80 (-0.17%)
NYSE Composite: 12,969.86, -47.03 (-0.36%)

Weekend Wrap: Booming Economy, Gradual Inflation Boosts US Stocks

While the NASDAQ and S&P set multiple intra-day and closing records, the Dow continued its slow progress toward the January 26, all-time closing high of 26,616.71.

Once more, the NASDAQ led all indices in percentage terms, chalking up a two percent gain for the final week in August. The Dow finished up August with a second consecutive monthly gain (+557.29), though it was less than half of July's rise (+1143.78).

Despite two straight losing sessions, the Dow stands just 650 points away from the record.

The strategy being forwarded by the Trump administration has great appeal on Wall Street, as the summer saw many positive gains across all sectors despite efforts by the media to ignore or downplay the president's accomplishments Pointing up potential drawbacks from proposed and enacted tariffs on imports and negotiated trade deals with Mexico and Canada, the left-leaning TV and big-city newspaper media continue a vain attempt to discredit the election of Trump in 2016 via ongoing harassment by the fake Mueller investigation and countless talking heads from former administrations taking every opportunity to trash-talk the current occupant of the White House.

Thus, while the media and proponents of the left side of the political aisle promulgate a false narrative, Donald Trump and his team are actually moving forward on bold economic plans, rescuing America from over a decade of stagnation and building for a better future.

Official and unofficial sources confirm that the two-pronged assault via media and political character assassination are being called into question by US citizens. Seeing bigger paychecks, job openings everywhere and a dramatic decline in Washington war-mongering, the general public simply is not buying with the media, Democrats, and political shills are selling.

With the three-day Labor Day weekend marking an unofficial close to summer, many professional traders will be getting back to serious work approaching the next FOMC meeting (September 25-26). It's accepted that the policy meeting will produce another 25 basis point increase in the target federal funds rate, boosting it to 2.00-2.25%. The effective rate as of July was 1.91%. There is s normal lag between the target and effective rate of a few days or weeks on the lower end. Currently, the effective rate has been rising between the 1.75% and 2.00% target rate set in June.

Two big items on the Fed radar are inflation and the dollar. Having targeted two percent inflation as desirable, official data shows a slow but steady rise, approaching or even exceeding the goal. The strong dollar, however, is acting as a counterweight not only to inflation but to tariffs, the rising dollar able to purchase more foreign goods for the same amount of money.

The strong dollar, rising interest rates, and positive data on the US economy (4.2% GDP growth in the second quarter) offer the additional benefit of making the US the best place to invest, either in equities (growth) or fixed income (stability).

With one month remaining in the third quarter, the US economy engine seems to be operating on all cylinders. Any slowdown, even as predicted by a potential inverted yield curve, is still expected to be at least six months to over a year away. With that kind of time horizon, there's little concern on Wall Street over even the most expensive stocks, such as the FAANGs (Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Google (GOOG) (Alphabet)), which continue to guide the NASDAQ to new highs.

Such strong speculative conditions should persist past the FOMC meeting into the fourth quarter. More than a few analysts had predicted a weaker second half of 2018, though those forecasts are likely to be tossed upon the scrapheap of financial history.

Donald Trump's "Make America Great Again" jingo is sounding like sweet music to the ears of investors, a condition unlikely to change any time soon.

Dow Jones Industrial Average August Scorecard:

Date	Close	Gain/Loss	Cum. G/L
8/1/18	25,333.82	-81.37	-81.37
8/2/18	25,326.16	-7.66	-89.03
8/3/18	25,462.58	+136.42	+55.05
8/6/18	25,502.18	+39.60	+94.65
8/7/18	25,628.91	+126.73	+221.38
8/8/18	25,583.75	-45.16	+176.22
8/9/18	25,509.23	-74.52	+101.70
8/10/18	25,313.14	-196.09	-94.39
8/13/18	25,187.70	-125.44	-219.83
8/14/18	25,299.92	+112.22	-107.61
8/15/18	25,162.41	-137.51	-245.12
8/16/18	25,558.73	+396.32	+151.20
8/17/18	25,669.32	+110.59	+261.79
8/20/18	25,758.69	+89.37	+351.16
8/21/18	25,822.29	+63.60	+414.76
8/22/18	25,733.60	-88.69	+326.07
8/23/18	25,656.98	-76.62	+249.45
8/24/18	25,790.35	+133.37	+382.82
8/27/18	26,049.64	+259.29	+642.11
8/28/18	26,064.02	+14.38	+656.49
8/29/18	26,124.57	+60.55	+717.04
8/30/18	25,986.92	-137.65	+579.39
8/31/18	25,964.82	-22.10	+557.29

At the Close, Friday, August 31, 2018:
Dow Jones Industrial Average: 25,964.82, -22.10 (-0.09%)
NASDAQ: 8,109.537, +21.174 (+0.26%)
S&P 500: 2,901.52, +0.39 (+0.01%)
NYSE Composite: 13,016.89, -23.04 (-0.18%)


For the Week:
Dow: +174.47 (+0.68%)
NASDAQ: +163.56 (2.06%)
S&P 500: +26.83 (+0.93%)
NYSE Composite: +17.45 (+0.13%)

Stocks Take A Breather As Tariff Talk Toughens; Underground Economy, Self-Employment Rising Rapidly

This was not completely unexpected.

Markets have been absolutely on fire the past two weeks, and a pullback was inevitable. The culprit, as usual, will be Donald Trump, and his threat to slap tariffs on $200 billion of Chinese imports.

While the additional revenue will no doubt aid the fiscal formula of the federal government, the merger impact will be in the form of higher prices, though the effect will be spread out among America's 325 million populace.

Another way of looking at it is that $200 billion worth of Chinese goods spread among roughly 200 million adult Americans comes to $1000 per person. If you whack the goods another 25% with tariffs, it's another $250 per person. Over the course of six months or a year, it's not much, say five to 10 bucks a week.

Chump change... or maybe, Trump change.

An article that caught the eye today focused on the burgeoning self-employment movement in the United States, which has been growing at three times the rate of regular employment over the past three years.

Credit American ingenuity. Work is changing and more than a few people are trading in the nine-to-five grind for making their own hours, especially among Millennials and older, healthy retirees or semi-retired folks. With the burden of Obamacare taken off the backs of Americans, the workforce is free to follow the money, be it as a Uber driver, seller of goods on eBay, pushing online services, or a myriad of other self-employment opportunities, many of which are unregulated, untaxed, and unreported.

The so-called "underground economy" which the US government gave up trying to track in the mid-seventies, is enormous. Its presence and size puts to shame all the government employment statistics, especially the low "persons in the labor force" numbers that plagued the Obama years. Americans come in all stripes and flavors, from welfare recipients who do side jobs, to baby boomers who mow lawns for cash. Most of all, Americans are resourceful and many of them are overtaxed and seeking ways to increase their incomes without notifying the IRS or state governments.

It's working, and the money generated goes all through the economic powerhouse that is the US domestic economy. Governments - local, state, and federal - are all too big and they all waste people's time and money. The US population moved on years ago. Only now, it's getting to be so large that it's hard not to notice.

There probably aren't too many people who remember the years of Prohibition (1920-1933), when government over-reached, outlawing the sale and distribution of alcoholic beverages. By the mid 1920s, the "underground economy" of the day had exceeded the "official" government-tracked economy. We're on the same path today. People want more control of their lives and their money, and they're taking both back, with a vengeance.

No pension? No problem. Little league umpires make $30-60 per game and most of it is paid in cash. That's just one example.

Dow Jones Industrial Average August Scorecard:

Date	Close	Gain/Loss	Cum. G/L
8/1/18	25,333.82	-81.37	-81.37
8/2/18	25,326.16	-7.66	-89.03
8/3/18	25,462.58	+136.42	+55.05
8/6/18	25,502.18	+39.60	+94.65
8/7/18	25,628.91	+126.73	+221.38
8/8/18	25,583.75	-45.16	+176.22
8/9/18	25,509.23	-74.52	+101.70
8/10/18	25,313.14	-196.09	-94.39
8/13/18	25,187.70	-125.44	-219.83
8/14/18	25,299.92	+112.22	-107.61
8/15/18	25,162.41	-137.51	-245.12
8/16/18	25,558.73	+396.32	+151.20
8/17/18	25,669.32	+110.59	+261.79
8/20/18	25,758.69	+89.37	+351.16
8/21/18	25,822.29	+63.60	+414.76
8/22/18	25,733.60	-88.69	+326.07
8/23/18	25,656.98	-76.62	+249.45
8/24/18	25,790.35	+133.37	+382.82
8/27/18	26,049.64	+259.29	+642.11
8/28/18	26,064.02	+14.38	+656.49
8/29/18	26,124.57	+60.55	+717.04
8/30/18	25,986.92	-137.65	+579.39

At the Close, Thursday, August 30, 2018:
Dow Jones Industrial Average: 25,986.92, -137.65 (-0.53%)
NASDAQ: 8,088.36, -21.32 (-0.26%)
S&P 500: 2,901.13, -12.91 (-0.44%)
NYSE Composite: 13,039.93, -92.23 (-0.70%)

S&P, NASDAQ Set Fresh Records, Dow Higher 4th Day In Row

The gains are beginning to become monotonous.

As the second estimate of 2Q GDP came in hot, at 4.2%, investors were encouraged to buy even more stocks, sending the S&P and NASDAQ to all-time closing highs, pushing the Dow closer to it's January 26 mark of 26,616.71.

There seems to be nothing in the way of this current hot streak. The Dow is up four straight days and has tacked on nearly 1000 points since August 15.

There's likely to be some kind of pullback this week, though it's probably going to be temporary. With Labor Day upcoming, market professionals will be back to business on Tuesday of next week without much worry.

All signs point to an extension of the record market run.

Dow Jones Industrial Average August Scorecard:

Date	Close	Gain/Loss	Cum. G/L
8/1/18	25,333.82	-81.37	-81.37
8/2/18	25,326.16	-7.66	-89.03
8/3/18	25,462.58	+136.42	+55.05
8/6/18	25,502.18	+39.60	+94.65
8/7/18	25,628.91	+126.73	+221.38
8/8/18	25,583.75	-45.16	+176.22
8/9/18	25,509.23	-74.52	+101.70
8/10/18	25,313.14	-196.09	-94.39
8/13/18	25,187.70	-125.44	-219.83
8/14/18	25,299.92	+112.22	-107.61
8/15/18	25,162.41	-137.51	-245.12
8/16/18	25,558.73	+396.32	+151.20
8/17/18	25,669.32	+110.59	+261.79
8/20/18	25,758.69	+89.37	+351.16
8/21/18	25,822.29	+63.60	+414.76
8/22/18	25,733.60	-88.69	+326.07
8/23/18	25,656.98	-76.62	+249.45
8/24/18	25,790.35	+133.37	+382.82
8/27/18	26,049.64	+259.29	+642.11
8/28/18	26,064.02	+14.38	+656.49
8/29/18	26,124.57	+60.55	+717.04

At the Close, Wednesday, August 29, 2018:
Dow Jones Industrial Average: 26,124.57, +60.55 (+0.23%)
NASDAQ: 8,109.69, +79.65 (+0.99%)
S&P 500: 2,914.04, +16.52 (+0.57%)
NYSE Composite: 13,132.16, +47.36 (+0.36%)

Stocks Add Marginally To Upside Awaiting 2nd 2Q GDP Estimate

The Dow Jones Industrial Average tacked on modest gains, as did the NASDAQ and S&P 500. It was the seventh day in the last nine trading session in which the Dow has posted gains. The index is up 900 points since August 15.

On the downside was the NYSE Composite, losing 17 points.

Investors were on hold in advance of Wednesday's second estimate of second quarter GDP. The prior estimate, released in late July, saw the economy rowing at a 4.1% annualized rate.

Dow Jones Industrial Average August Scorecard:

Date	Close	Gain/Loss	Cum. G/L
8/1/18	25,333.82	-81.37	-81.37
8/2/18	25,326.16	-7.66	-89.03
8/3/18	25,462.58	+136.42	+55.05
8/6/18	25,502.18	+39.60	+94.65
8/7/18	25,628.91	+126.73	+221.38
8/8/18	25,583.75	-45.16	+176.22
8/9/18	25,509.23	-74.52	+101.70
8/10/18	25,313.14	-196.09	-94.39
8/13/18	25,187.70	-125.44	-219.83
8/14/18	25,299.92	+112.22	-107.61
8/15/18	25,162.41	-137.51	-245.12
8/16/18	25,558.73	+396.32	+151.20
8/17/18	25,669.32	+110.59	+261.79
8/20/18	25,758.69	+89.37	+351.16
8/21/18	25,822.29	+63.60	+414.76
8/22/18	25,733.60	-88.69	+326.07
8/23/18	25,656.98	-76.62	+249.45
8/24/18	25,790.35	+133.37	+382.82
8/27/18	26,049.64	+259.29	+642.11
8/27/18	26,064.02	+14.38	+656.49

At the Close, Tuesday, August 28, 2018:
Dow Jones Industrial Average: 26,064.02, +14.38 (+0.06%)
NASDAQ: 8,030.04, +12.14 (+0.15%)
S&P 500: 2,897.52, +0.78 (+0.03%)
NYSE Composite: 13,084.80, -17.23 (-0.13%)