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Morning Commentary

Two Hours to (really) Save Face

By Charles Payne, CEO & Principal Analyst
5/9/2019 8:48 AM

I spoke to the team yesterday, and the live audience event next week is filling up fast. It will be standing room only. I’d love to meet you, so if you’re in the NYC area, come check it out.  Next Thursday, May 16.  It’s going to be great.

Click the link for more details.

https://www.eventbrite.com/e/a-fox-business-special-event-capitalism-vs-socialism-tickets-60833527719

Like a Long-Tailed Cat in a Room Filled with Rocking Chairs

The market anxiety continued, as each headline and every rumor on trade negotiations moved the stock market. Yesterday, nine of the eleven S&P sectors were higher by noon, and market breadth was modestly positive. In addition, yesterday’s meeting with the Chinese trade delegation was a short affair, making higher tariffs a foregone conclusion for many market participants.

If this is the case, at the stroke of midnight, additional tariffs will be levied against certain Chinese imports. Conventional wisdom says it will be short-lived, perhaps a week or two.

There is no telling what kind of tantrum Wall Street will have, but the deeper the better if you have cash in your account and aren’t a day trader. I still believe a deal will get done, and I’m more convinced than ever that it will be monumental. Forget about all that nonsense about China “saving face.” After decades of abusing the trust and usurping the intent of the World Trade Organization (WTO), nobody cares.

In fact, after agreeing on a multitude of key points, Chinese negotiators sent back a completely different document. Sure, there were tentative aspects, but most of the key points were agreed, and yesterday’s meeting was ostensibly to cover the last 10% of the deal. It was a grifter-like move, like showing the bartender a $50.00, then slipping him a $5.00 to pay for a $4.00 drink and asking or demanding $46.00 in change.

It’s tough to gauge any of this because President Trump isn’t using old-school statecraft that got America and the western world into this pickle in the first place.

The Message of the Market

I find it interesting the worst performing sector was the safe haven Utilities (XLU), which got drubbed during the session. 

Although it closed unchanged, Real Estate (XLRE) was the best performer for most of the session, but it’s a plan on the next generation of communications. Individual investors should consider exposure to the best names in the sector yesterday: American Tower Group (AMT) and Equinix (EQIX).

S&P 500 Index

 

-0.16%

Communication Services (XLC)

 

-0.16%

Consumer Discretionary (XLY)

+0.03%

 

Consumer Staples (XLP)

 

-0.02%

Energy (XLE)

0.00%

 

Financials (XLF)

 

-0.22%

Health Care (XLV)

+0.21%

 

Industrials (XLI)

0.00%

 

Materials (XLB)

 

-0.09%

Real Estate (XLRE)

0.00%

 

Technology (XLK)

 

-0.12%

Utilities (XLU)

 

-1.37%

Portfolio Approach

I’m licking my chops, but I am not going to force the issue. Also, I am not worried about being in first or picking bottoms. There are so many professional investors that hate this market for one reason or another; we’ll get in at the turn, long before they decide to put money to work.

Communication Services

Consumer Discretionary

Consumer Staples

1

4

1

Energy

Financials

Healthcare

1

1

1

Industrial

Materials

Real Estate

2

3

0

Technology

Utilities

Cash

2

0

4

Today’s Session

US – China Trade Showdown Countdown to Midnight

This week’s economic data is a reminder that China isn’t the unstoppable economic juggernaut portrayed by many inside and out of the country.  In the first four months, China defaults (missed corporate bond payments) here ¥39.20 billion and on pace to shatter a record.

Aggregate Financing:

Yuan four month low

https://www.tradingview.com/x/b3QPwdGE/

Shanghai Exchange 

The futures are pointing to a lower open this morning as investors wait and see how the trade talks go today.


 

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