Investor sentiment stays positive despite geopolitical drama

Weekly Market Compass: Investors seem to be tuning out everything except trade wars and Fed tightening

Time to read: 5 min

There has been no shortage of drama across the macroeconomic and geopolitical landscape so far in 2019. However, it appears that investors may be tuning out much of the political theater around them. Which storylines are moving markets now, and which may become more integral to the plot in the weeks ahead?

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A modern-day War of the Roses: Is a real winner possible in the US-China trade war?

Weekly Market Compass: In an era of globalization, trade wars mean losses for all sides

Time to read: 6 min

Students of history may recall the War of the Roses, which was waged more than 500 years ago. It was an epic battle between two rival branches of the English royal family that both had claims to England’s throne — the House of Lancaster, represented by a red rose, and the House of York, represented by a white rose. While the House of Lancaster ultimately won the War of the Roses, by some measures there was no real winner. The war lasted for many years and resulted in very significant damage to both houses. In fact, by the end of the war, the male lines in both houses had been eliminated.

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No holiday in sight for global disruption

Weekly Market Compass: A long list of challenges will follow markets into the new year

Time to read: 5 min

At the start of 2018, I warned about two significant forms of disruption that posed risks to markets: geopolitical disruption and monetary policy disruption. The solution to the global financial crisis — experimental monetary policy — had created greater wealth inequality, which had led to geopolitical disruption, and the situation was poised to worsen in 2018. This experimental monetary policy, especially large-scale asset purchases, was beginning to be unwound — and that was an experiment in and of itself which also had the potential to cause disruption.

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Putting the sell-off in perspective

Despite the recent bad news, I am more positive today than I was earlier in the year

Time to read: 5 min

Last week saw major swoons in the stock market and US Treasuries. As of this writing, the sell-off has been continuing. However, I still hold out hope that we could see stocks finish higher than where they are now by year end. Yes, Virginia, there still is the possibility of a “Santa Pause.”

Examining the causes of the sell-off

Investors seem to largely be reacting to concerns about the possible escalation of trade wars between the US and China. First came the realization that the Donald Trump-Xi Jinping trade talks at the G-20 meeting did not achieve the results that had initially been reported. Then, later in the week, the arrest of Huawei’s chief financial officer by Canadian authorities at the behest of the US caused a significant amplification of concerns that the US-China trade relationship would deteriorate.

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Could December be the start of a ‘Santa Pause’ rally for stocks?

The Federal Reserve’s tone has become more dovish, while the US and China have made progress on trade

Time to read: 6 min

When I was in high school, I worked as a lifeguard. I loved the job, but I was always aware of the enormous responsibility that came with it. I found the key to success was to anticipate trouble before it happened — to watch swimmers for any early signs of distress before they ever came close to drowning. Today, I see similarities between lifeguards and policymakers such as the US Federal Reserve (Fed), which must try to anticipate economic downturns before they start. For the last several weeks, I have written in my blog that signs of a global slowdown are starting to appear. The good news is that policymakers appear to be reacting to those early signs — which I believe could help spur a “Santa Pause” rally for markets.

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