“I Wouldn’t Touch These Stocks with a 10-Foot Pole”
Futures are pointing to a positive open for stocks this morning.
But how long the markets will stay green today is anyone’s guess.
Yesterday marked the third-straight day of whipsaw action as the major averages faded from their highs into the closing bell. A strong rally gave way to some afternoon selling, with the Dow Jones Industrial Average dipping nearly 400 points from its intraday highs in the final hours of the trading day.
While the major averages still managed to close solidly in the green, it’s becoming clear that politicians and the financial media are holding the stock market hostage.
Just look at the laundry list of fake-out moves (higher and lower) we’ve endured just over the past week:
On Monday, the Dow cratered 600 points before fighting back into the green by the closing bell. Stocks then gapped higher on Tuesday, only to crash back to earth and close deep in the red. Add in yesterday’s action and you can see why many investors are so frustrated right now…
Of course, market conditions could change in an instant.
Any extended market comeback is at the mercy of the dual threat of trade war negotiations and government shutdown threats. Just look at Wedneday’s rally, which gained steam after Trump commented that he would intervene in the arrest of Huawei’s CFO if it would help net a trade deal with China.
This morning, trade tensions are apparently easing (again?) “as China reiterated its officials have been in close contact with U.S. counterparts on negotiating details of a deal, and after resuming purchases of American soybeans,” Bloomberg notes.
Still, international relations between the East and the West remain strained as China detains a second Canadian for questioning, Bloomberg reports, presumably in retaliation for the Huawei arrest.
Thankfully, Trump is tweeting about the border wall this morning instead of stirring the trade war pot. A little radio silence on tariffs might help quell some of the market’s more erratic behavior…
In other Chinese market news, trade war fears couldn’t stop the Tencent IPO.
Chinese music streamer Tencent Music Entertainment (NYSE:TME) finally debuted on the New York Stock Exchange yesterday. The new offering was priced at the lower end of its range, yet gapped open and traded higher all day.
“The big story is that the deal got done at all,” CNBC’s Bob Pisani notes. “It was supposed to come in October, but the company postponed it, citing the global market selloff at that time. Those weak market conditions have continued, along with some signs China is slowing, but this time the company decided to go ahead with the deal regardless.”
Despite less-than-ideal market conditions, investors prove once again that they have an appetite for new listings — even if the prices aren’t sky-high anymore.
Speaking of foreign stocks, one Bank of America strategist says he wouldn’t touch emerging markets “with a 10-foot pole.”
Bank of America’s David Woo isn’t interested in bottom-fishing emerging market stocks. In fact, he says he would avoid these names entirely until the trade dispute is settled, Bloomberg reports.
Woo’s stance seems perfectly logical to me. After all, emerging markets have trended lower most of the year. The iShares MSCI Emerging Markets ETF (NYSE:EEM) is down almost 14% year-to-date.
But if I had to put in a bet today, I would guess these beaten-down stocks are closer to a bottom than most people think. While the S&P 500 continues to trade near its correction low, emerging markets have quietly ticked higher since late October. Perhaps these stocks will become new market leaders once the dust clears.