This Morning’s Log Entry

8/19/19 Monday

While the weekend didn’t deliver a rolling back of the yet to be rolled out (pending) tariffs effective 9/1 and 12/15, which I thought could happen, and, thus, send stocks sharply higher this morning, stocks are looking to open sharply higher this morning nonetheless.

Last Tuesday’s 400-pt Dow rally was on the raft of exceptions made to the above-referenced tariffs. This morning’s similar move (at least in futures as I type) is on news that Huawei will get another 90-day extension on its access to U.S. suppliers, and strong hints from Trump that Apple will be exempted from the new tariffs after all (reversing his decision a couple weeks ago that they wouldn’t).

Also adding fuel to the bull’s fire is the simple fact that China’s promised soon-to-come retaliatory measures haven’t shown up. Perhaps last week’s lightening up on the new tariffs and the Huawei reprieve has China in wait and see mode. Time will tell…

Another potential boost for stocks (or not) could emerge from this week’s Fed gathering in Jackson Hole, Wyoming. This annual get together has been huge in years past, as it has more-than-once been the venue for the announcement that strong stimulus measures (read QE) are in the offing. Analysts are anticipating that the Fed will signal a ramp up in rate cuts over the coming months. If this morning’s rally gains steam and runs further into the week, the bulls run the risk of over-pricing Fed prospects, if not calming nerves to the point where they could even temper their enthusiasm for cutting. In which case the bulls will find themselves trapped, much like the bears do this morning…

In any event, the world’s central banks are in full-on stimulus mode; China announced a new round that sent its stocks soaring last night, which bled into Europe (helped also by Jeremy Corbin’s vow to do everything necessary to avoid a hard Brexit) and no doubt the U.S. this morning. Remember, China is the second largest economy in the world, what looks good for it, looks good for the rest of the world as well…


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