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Morning Commentary

Too Late to Turn Back Trade Deals?

By Charles Payne, CEO & Principal Analyst
11/13/2017 9:30 AM
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Last Friday was a mixed and lackluster session on Wall Street with the Dow and the S&P 500 lower, ending an eight-week winning streak while the NASDAQ edged into the plus column.

There is no doubt the market is still trying to come to grips with competing GOP tax plans, which must be debated, along with compromises made, ready for President Trump to sign by the end of the year.

Meanwhile, rotation continues into beaten-down stocks, perhaps looking for value as limited risk continues. Consumer staples were big winners last week, but are gargantuan losers for 2017:

I wrote last week, consumer staples and discretionary stocks aren’t going to lead a market-wide stock market rally. In fact, smart money would rather seek value in oversold names rather than cash out - chilling on the sidelines is a strong sign.  Another strong sign is the possibility of the third consecutive quarter of a 3.0% Gross Domestic Product (GDP) or better.  That would be huge!

Is it too late to Force Trade Change in Asia?

President Trump’s Vietnam visit is his fourth country on his whirlwind Asia tour to promote trade and global safety. There is unanimous agreement on the latter, particularly when it comes to the menacing threat of North Korea. Tough talk on trade will have to be followed with tough negotiations to tilt the trade balance back toward America.

The four nations President Trump visited enjoyed a collective $475 billion trade deficit with the United States last year, which has helped millions of their citizens’ climb into the global middle-class, driven in large part by China after it was admitted into the World Trade Organization (WTO) in 2001.

Friday, China flexed its economic might, showing off its middle-class muscle as the e-commerce giant Alibaba (BABA) kicked off its annual Single‘s Day holiday, which has become a spending extravaganza.   Management conceived this holiday in 2013, looking to crush the record $18.0 billion in sales from last year, and got off to a roaring start with $8.4 billion in the first hour.

By the end of the 24-hour period, Alibaba’s Single‘s Day sported impressive numbers:

Keep in mind that Black Friday in America generated $3.0 billion sales and Cyber Monday with a respective $3.45 billion last year. Alibaba’s shares closed up $1.28 to $186.41 year-to-date; the stock is up 112%.   

Single‘s Day features 60,000 global brands, including 7,000 American products, which illustrate the dilemma in trying to fix trade. It’s now estimated the global middle-class outside North America will grow exponentially with Asia Pacific up 150% from 2015 to 2030, while North America is expected to increase less than 6.0%.

The question is whether it is too late to turn the tables on decades of bad trade deals. 

Today’s Session

Equity markets are looking to open under pressure, picking up from last week’s anxiety.  General Electric has lowered its FY 2018 outlook and cut its dividend.  Initially GE shares edged higher, but are now under pressure, as speculation about its listing and ability to turn it around is pondered.

Republicans are still looking like they might flub tax reform.  That would be a disaster beyond purely economic ramifications and the inability to get Obamacare repeal and taxes done would send a message to business of ineptness that makes it harder to invest. 

The market’s amazing run has been marked with periods of doubt and moments of pauses, long enough for weaker/less convinced investors to hit the exits.  Although there hasn’t been a major change in valuations (using most traditional metrics), big moves could make the shadow of doubt last longer this time around. 

For now the key is to know and monitor underlying fundamentals and value proposition of your holdings and not to be afraid to take profits or losses for those not up to snuff.  That cash could find better investments very soon.

A big hickup by the establishment pond scum McConnell,ryan.mccain,collins, all the usual suspects and that correction will happen. It actually needs to....

gregg on 11/13/2017 10:03:41 AM
Then put the soak the rich ( mid middle class and small biz folks ) back in power and watch what happens.

garro on 11/13/2017 12:32:11 PM

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