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Things to know
- Algo’s create havoc on the mkts and for investors
- G7 Produces no real results
- Trump says that he got a call from China
- Gold spiked and awaits new news
What a wild day it was…..Powell’s Jackson Hole speech, concern over interest rates, Trump Trade Tirade all contributing to the drama…..Stock futures which had been up prior to the morning got whacked at about 5 am – when China announced that they would in fact retaliate against the US and impose tariffs on $75 bil worth of US goods……The surprise announcement (although why anyone was surprised is another issue) did cause the algo’s to react and boom…..mkts turned lower and the Dow was down by about 100 pts at the opening bell…. – nothing to get all worked up about……and we hadn’t heard from Jay yet……Now remember – the angst built around what Fed Chair Jay Powell was going to say or not say kept mkts on the edge – many expected him to comment on US Federal Reserve Policy – not sure why since that was not on the agenda – but between the media and the signals from the mkt – many wondered – will Jay Powell give us a hint…. In fact – Jay Powell did say that the FED would follow last month’s cut with another cut (without defining the date) but he did not push back on the idea of a September cut and he stopped just shy of saying exactly how much more we can expect in terms of rate cuts, but he did ‘we will act as appropriate to sustain the expansion’ (All information that we knew). All good right? I mean considering the symposium was about “Challenges to Monetary Policy” and not ‘What is US Interest Rate Policy’ – his comments were well received by the mkt……no issues….no fallout……no drama…….until –
11:28 am…..when the Trump Tweet Tirade began….. – first he took a shot at the FED and the FOMC (Federal Open Mkt Committee) – saying that they had no idea what they were doing and that the Jay Powell disappointed him again (apparently for NOT announcing a specific rate cut on Friday – which was never expected)…..blah, blah, blah…..I mean you get it, right? And then he slammed both Chinese President Xi and Jay Powell in the same tweet questioning ‘Who was the bigger enemy’…I mean tweets that did nothing other than create drama and then a massive sell off.. because then the conversation turned to the looming recession and if the trade war was spinning out of control (as it appeared) then we can be sure that the recession was coming……and this once again caused a rush int the safety trade (think treasuries) which cause another ‘INVERSION OF THE YIELD CURVE’ and why?
Let’s do this again…..human beings can listen and interpret the language and by now – most of us have learned to tune out a lot of what we see the President tweet….recognizing that it is just his way of communicating and reaching the masses – on both sides of the aisle…but here is the kicker……the ‘smart logic algo’s’ that scrape the headlines from any and all sources available (are in fact not so smart) CANNOT, with any real success, interpret the language the way we do…..The algo’s have been programmed to look for words and then decide (via the logic) if the words are positive or negative….and then react – react with such speed that before you know it – the mkt is either rallying broadly or collapsing upon itself…..
So – collapse upon itself was what happened and then if that wasn’t enough he then ‘ordered all American companies to stop doing business with China’ suggesting that he also had the authority to do it…..and the next wave was born and the mkt fell even more….now understand that when these types of Tweets come out – and the algos’s that create the sell orders – also create cancellations of the buyside liquidity – creating a void in prices that allows for the collapse….now in that vein – it all works as expected….the mkt was not in panic mode at all on Friday – it was ugly and it was the speed at which that happens that makes it uglier and a bit more frightening for the average investor…..and this is where I think it borders on stupidity – because what really changed? Nothing…..but we have given the machines permission to control the mkts..and so this is what we get…..The massive swings in volatility at a time when anxiety is running a bit above normal creating a nervous mkt whose reaction is to ‘shoot first and ask questions later’……
By the end of the day – the indexes all suffered – and by default – investors suffered…..the Dow ended down 624 pts or 2.37%, the S&P was lower by 75 pts or 2.59%, the Nasdaq gave up 240 pts or 3%, the Russell falling 46 pts or 3.09% while the Transports took it the hardest – falling 333 pts or 3.31%……And by 8 pm – President Trump was on Air Force One on his way to the G7 (in Biarritz, France) to participate in the annual event that brings 7 of the worlds biggest industrialized nations together to discuss ‘Fighting Inequality’. (Gender, education, environmental, social, trade, taxation,) as they searched for peace against security threats and terrorism using digital technology and artificial intelligence. Sounds all very high level – but in the end there was no official communique.
Overnight – as the sun set on the California coast – it rose over the Asian region – futures traders all on the edge – continuing to react to Friday’s massive sell off – Asian mkts opened lower (and closed lower) and US futures were getting clobbered again….at 9 pm (Sunday) Dow futures were lower by 300 pts….and it looked ugly……but then at about 3 am (est) this morning….Trump makes an announcement (from France) that the Chinese want to come back to the table and make a deal…. That in fact – The Chinese trade negotiator Liu He – called not once – but twice to say “let’s get back to the table” – causing President Trump to suggest that his hardball tactics were working for the benefit of the US and BANG – futures went from minus 309 pts to plus 157 pts or a 457 pt swing as the algo’s celebrated the news…..(now see how this is) ….at 7 am this morning there is still NO confirmation that this happened and in fact the Chinese have stated that they never called….US futures have backed off a bit as it tries to sort out the news…..Trump sitting at a meeting in France – saying how great President Xi is and how they want to make a deal and that we will make a good deal and if we don’t then US companies will leave China……So folks, this isn’t over by any stretch so expect more volatility…..
Remember – after all the back and forth – the mkt has suffered even more internal damage – and so it will need time to re-calibrate and while that happens – it will continue to thrash around. The S&P has now attempted to test its long term moving average (8/5, 8/15, and 8/23) – stopping just short of actually kissing it…..remember – the Dow has now breached its long term avg on those same 3 days but recovered quickly…and I still think that the S&P and Nasdaq need to really test it…..before – technically – the mkt can move ahead. While this is happening – long term investors need to try hard to eliminate the noise and concentrate on the plan. No reason to run and hide and your advisor should be able to explain that.
Overnight as I said – Asian mkts all closed significantly lower (catching up to what happened in the US on Friday) as investors there got a chance to react to the intensifying rhetoric surrounding trade…..Protests in HK turned more violent over the weekend are not helping the overall mood. By the end of the day – Japan – 2.17%, Hong Kong – 1.9%, China – 1.44% and ASX -1.27%, Taiwan and South Korea mkts also lower by 1.7% and 1.64% respectively. But remember – China has not confirmed this call – and in fact appears now to be moving away from Trumps version of the events. Remember – Xi needs to save face and not appear to be crawling back to the table – especially as they celebrate the 70th anniversary of the People’s Republic of China.
European mkts have begun the day – rising after the news that China wants to come back to the table…..(prior to that news – Euro futures were also pointing lower but did an about face after that announcement). Over the weekend – tensions were also high at the G7 as the US and France volleyed back and forth over France’s digital tax plan that is set to hit some bit US tech names. Trump has suggested that he would impose tariffs on French imports if they went ahead with this plan, causing the European Council President Donny Tusk to say that Brussels would ‘respond in kind’ if Trump moves ahead with tariffs on France…… FTSE Closed, CAC 40 + 0.67%, DAX + 0.47%, EUROSTOXX + 0.58%, SPAIN +0.415% AND ITALY +1%.
US futures are now all in positive territory but off the highs earlier this morning…..The Dow is up 267 pts, the S&P is up 25, the Nasdaq is + 95 pts and the Russell is ahead by 16 pts. Not nearly enough to recoup Friday’s losses. Now – it is still unclear what the Chinese message was…..but the optimism should help reverse the negative news from Friday – Until it doesn’t’. The focus today and this last week of August will be focused on US/China trade but we will need more than some ‘off the cuff’ vague commentary to help stabilize the mkts and begin to repair the internal damage and investor psyche. Eco data today includes Durable Goods – exp of +1.2% – if we miss this estimate it will reignite the whole slowdown conversation – bringing up the ‘R’ word again. A good solid number will help to turn that conversation around. Look for the indexes to test their long term moving avgs to get comfortable with investor support…..we could see a snap back rally on any more verifiable positive news….that could see the same upside reaction that we witnessed on Friday’s downside. At his moment – it is the support level that is important… So stay tuned. Remember – Jay Powell made it clear that that monetary policy alone cannot stop any slide created by angst and anxiety over trade and policy.
Gold – rallied hard on Friday – no surprise there – and ended the day up $28 at $1,527 or 1.8% as the mkt sold off….think BIG safety trade…this morning gold is up another $2 as it waits for new news….any sense that the tensions are easing will cause the fast money guys to take profits in gold where it should find support at $1,500.
Oil – continues to struggle between $53/$55 as fears of recession linger as trade war tensions remain elevated. Look for short term support at $53 with resistance at $56.50.
Take good care.
Spinach Stuffed Chicken Cutlets Wrapped in Pancetta
Stuffed chicken is so versatile – as you can stuff it and roll it with anything you like and it always comes out great. Today – try this one…..
For this you will need: 8 Thin sliced Chicken Cutlets, 2 Cups Sautéed Spinach, Grated Pecorino Romano or Parmegiana Cheese, Thinly Sliced Pancetta, S & P, Olive Oil, Garlic, Peeled & sliced, Chicken Broth, Dry White Wine, Butter & Flour.
Sauté your fresh spinach in a bit of garlic and olive oil – seasoned lightly with s&p.
Lay the cutlets out flat on wax paper and lightly season with salt and pepper. Next divide the spinach amongst the eight cutlets, careful not to overstuff – leaving a little space along the sides. Now sprinkle a tblspn of the cheese on top of the spinach on each of the cutlets.
Starting at one end, tightly roll the cutlets – now wrap the pancetta around the chicken pinch it tight a toothpick. If it is a big cutlet you may need two pieces of Pancetta. (You can also choose to use cooking string to tie it up – but the toothpicks are easier.)
Now – In a large, heavy bottom skillet, add some olive oil over med high heat and add the sliced garlic. Sauté for about 3 mins – now add the chicken and brown on all sides, about 5 – 8 minutes.
Next – Add equal parts of chicken broth and wine and bring to a boil. (Usually a cup of each will do for 8 cutlets).
Reduce the heat to a simmer, partly cover the skillet and cook for 15 minutes.
Now remove the chicken and bring the remaining wine mixture to a boil
Season with s&p, – – now add dollop of butter and maybe a tsp of flour and allow to thicken just a bit. (if it is not thickening – you can always add a bit more butter and flour) When thickened – add the chicken back to the sauce and coat well. To serve – Place the chicken on a platter and pour the sauce on top. Make sure to have a mixed green salad to accompany. If you want – you can add a side of garlic and herb flavored rice. No need for a veggie – it’s in the cutlet.