So Maybe It Wasn’t So Clarified…

So maybe it wasn’t so clarified… I mean on Friday, it appeared that we “were done.” Markets rallied to new highs and the Dow breached 28,000. Over the weekend, we were told that the US and China had “constructive” talks. That’s good and then yesterday morning the Chinese come out and said “not so fast, big boy” as they expressed concern over some of the details.

Specifically, the December tariffs and all the other ones as well, need to come OFF the table for this to move ahead. Donny made it clear that tariffs were not even ON the table for discussion. Ultimately, this trade war began with the imposition of tariffs. As far as the Chinese are concerned, it needs to end with the elimination of those same tariffs. So folks here we are, in the same place we were. While the market appeared to become unsettled in the morning, by 11 am algos and investors began to take stocks to new highs yet again. It now feels like a complete surrender by the bears. The market makes new high after new high, even though we have zero movement on trade.

Defensive moves are taking center stage. Consumer staples, utilities, treasuries, and financials all leading the way… Energy and oil fell as the prospect of any deal happening anytime in the foreseeable future quickly fades. It is now the end of November There are five weeks left in the year. By mid-December, everyone goes into hibernation mode as they wait for the year end to come. Nothing gets done, not even a trade deal.

Overnight at the East Tech West “invitation only” conference in Nansha, Guanzgshou China, Pimco Vice-Chairman John Studzinski told the audience that a trade deal “could be done by Christmas.” Well, isn’t that a mind-blowing statement. I mean, a trade deal could be done by next week IF anyone really wanted it. The reason I say that is because it doesn’t feel like either side is anxious to get this deal done. Neither side appears to ready to compromise and so, until they do, we will get this back and forth. One day yes, the next day no, just as we’ve seen for months now. China is clearly digging their heels in, testing Donny’s will.

Bob Pavlik, Chief Investment Strategist at Slatestone Wealth (Jupiter, FL), had this to say to CNBC yesterday:

“The stock market has shown remarkable resiliency. What is more remarkable is that the issues that the market has been dealing with since the start of the year haven’t dissipated but have grown or become more complicated.  The trade conflict, remains an overhang for the market while corporate earnings have not improved and economic news has weakened.” 

So you ask: ok, if that’s true (and it is), what has changed? Why are global markets on a tear at year end?

Simple, interest rates! The ECB (European Central Bank) has once again launched into a massive QE program in September. The FED has cut rates three times this year, the most recent slash in October. And has left the door wide open to do more if the data demands it. Even the Chinese have cut rates and added big money to their economy as they try to combat weakening macro data. And all of this slash and burn has helped global markets make or attempt to make new highs.

Did you know that Year-To-Date global indexes are surging? All while the global economy is supposedly stalling, all while the US/China trade war puts pressure on world trade, all while geo-political unrest simmers around the world, all while Lizzy and Bernie make plans to “take your money” and “re-distribute it” as “they see fit.” All while our democracy comes under fire. If you have been a global investor this year, you have done very well for yourself. And you have seen your 401K, IRA, pension plan, 529 college plan, etc. grow beautifully to help pay for those expenses you are saving for. As on last evening, year-to-date global indexes are UP.

Dow +21%, S&P + 25%, Nasdaq + 29%, Russell +19%, German +25%, France + 25%, Italy +28%, Eurozone (Eurostoxx) + 23%, Japan +17%, China + 30%, Australia + 20%, Taiwan +19%, Greece +40%, Russia +31%, and the list goes on…

This morning we see that global markets continue to surge as investors/algos do not seem to care any longer about the state of the trade war. As of last night, there is no deal. We are not just “a few short strokes away” as Larry Kudlow told us on Friday and over the weekend. And now it appears that investors are no longer even paying attention to those headlines, which could be an issue. If Dec. 15 comes and there is nothing, then look for the imposition of additional tariffs. While this would not be news, the market is expecting that those tariffs were “essentially off the table” as word of a trade deal permeated the newswires. By the way it feels right now, Santa Claus is alive and well and has a sleigh full of presents. PMs will push to maintain the gains through Dec. 31 as they get marked to market. It’s January then, that we should worry about.

Hong Kong was up 1.5%, as the protests continue, China + 1%, as talk of trade deal fades (illogical, or is it?), ASX +0.70% as the mins from the RBA (Reserve Bank of Australia) suggest that there is “a case for more easing” (think rate CUT), while Japan gave up 0.53%.

In Europe, it’s the same story: No deal. Yet the markets continue to surge as we get closer to year end. In the UK, it’s about elections and in the rest of Europe it’s about the macro economy, which apparently is not too bad, no matter what they say.

FTSE +1.20%, CAC 40 +0.45%, DAX +1.13%, EUROSTOXX +0.66%, SPAIN + 0.62%, and ITALY +0.61%.

US futures are edging higher again this morning continuing to build on yesterday’s surge. Dow futures are + 68 points, S&Ps are + 9 points, the Nasdaq is ahead by 37 points, and the Russell is adding 5 points. Yesterday, former WH Chief Economic Advisor and GS executive Gary Cohn told CNBC that without a deal, Trump has to impose the December tariffs. Otherwise, he will lose credibility and look weak. In other WH news, Trump and Fed Chair Jay Powell had lunch at the WH and Donny bitched about how “high” US rates are vs. our competitors. Jay said “Thank you for lunch. See you later.”

DXY (The Dollar index) at 97.85, fell 2.5% from the September high to the October low, breaching all three trend lines. It found support, rallied back only to fail again. It’s now about to test the long term trend line again at 97.57. A breach here could see it test the October low of 97 before finding support.

Gold found support at $1450 (as discussed last week), and is attempting to move higher again. But with markets surging and concerns fading, it will be tough for gold to make any real sustained move higher. We need a “crisis” for Gold to pop.

Take good care.

Kp


Cubanelle Peppers

Stuffed Cubanelle Peppers

Now I put this in my note from yesterday. Cubanelle peppers are the long Italian peppers used for stuffing. Pick up a dozen from the store and try this recipe.

You need: Cubanelle Peppers, Italian seasoned breadcrumbs, olive oil,

Put the breadcrumbs in a bowl and add some olive oil – enough to wet them but not enough to soak them… mix well…

Now – using a teaspoon – carefully stuff the pepper – pushing the breadcrumbs deep into the pepper with your finger if you need to. Once stuffed – place in a baking dish – alternating “head to toe.”

Preheat the oven to 375 degrees.

Now drizzle the peppers with a bit of olive oil – not too much – they will make their own oil…

Now cover with foil and place in the oven – bake for about 40 mins. Now remove the foil and let them brown a bit… if there is too much oil – just take a spoon and remove some it.

Let them brown for about another 10 – 15 mins or so. Remove and let stand while they cool. Now – if you overstuffed them – then expect to see some of the stuffing come out of the pepper – no problem – It’s all good. Serve alongside the other veggies at your Thanksgiving table.

Buon Appetito.

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Kenny Polcari

Kenny is the editor of Morning Thoughts and has been with Seven Figure Publishing since 2019.

Kenny is a CNBC exclusive contributor appearing on shows like The Halftime Report, Power Lunch, and Closing Bell. His market commentary has reached audiences across the nation on media outlets such as Bloomberg, Fox, ABC, and more.

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