WHAT COULD POSSIBLY GO WRONG?
Financial follies and disaster in the making
Stocks have broken out to new all- time highs... The bull market is officially back on track. More compelling, small-cap stocks typically give us a deeper understanding into what’s happening in the market. If the overall market is soaring but small caps aren’t, that’s cause for concern. It means only the biggest companies are succeeding... which means the boom could be ripe for collapse. Today, small-cap stocks remain near all-time highs, which means it’s not just the largest stocks pushing the overall market higher... In addition, you can look at the entire market to see how many stocks are moving higher versus how many are moving lower. It’s called the "advance/decline line." Today, we’re seeing a lot of stocks climbing. The advance/decline line has been hitting new highs, just like small-cap stocks. We know that eventually this bull market will end. But until then, the good times are rolling along. What could go wrong?
The trade dispute between the U.S. and China heats up... again... Last week, President Donald Trump warned that additional tariffs on nearly $270 billion in Chinese goods could be rolled out on short notice. Speaking aboard Air Force One, Trump said the tariffs would be in addition to the $200 billion in tariffs already announced. If this third round of tariffs eventually comes to pass, it would bring the administration’s total tariffs on China to nearly $520 billion. This is more than the total amount of goods the U.S. imported from China all last year, and it’s far more than China imports from the U.S. each year. In other words, it exceeds China’s ability to enact “tit for tat” tariffs as it has threatened in the past. But that didn’t stop China’s leaders from once again threatening retaliation. It’s not clear how China would respond to this latest round of tariffs, but it's clear why the country is motivated to act. This latest round targets China’s mobile-phone industry, which accounts for more imports to the U.S. than any other.
14 September 2018
Made with FlippingBook Learn more on our blog