War!

No doubt about it, the U.S. and China are in a full-blown trade war.  There have been a few cease fires along the way, but these didn’t hold.  Stock markets all over the world took a downturn with the recent announcements of the extension of tariffs to all Chinese goods imported to the U.S.  Stabilization failed when China responded by depreciating its currency.  This partially neutralized the additional announced tariffs, but also signaled that the Chinese have significant weapons left to defend their position.

The scariest response in the stock and fixed income markets was the collapse in U.S. Treasury yields.  This created additional fears about what this move might mean about economic expectations; was the precipitous decline in interest rates signaling a recession?  Investors taking no chances sold.  It’s been a pretty ugly week or so.

Money flows have held up far better than the price action.  Somebody is accumulating stocks as they have sold off.  In fact, some of the most cyclical sectors are showing better positive flows than the previous growth leaders.  This may fit in with an expected leadership change in the stock market; from growth to value – we are watching closely.  However, off the bottom all stocks should bounce.  We believe that is coming based upon the money flow data we are observing; stay steady, my friends.

the Lonely Bull