In yesterday’s internal log entry, which I shared herein, I made mention of China’s better than expected manufacturing purchasing managers survey results. This morning we got the Euro Zone’s reports, which, save for France’s weren’t so good.

The reading for the overall region was 47 for August; below 50 denotes contraction in the manufacturing sector. The UK’s was also released and it didn’t fare much better, coming in at 47.4.


Yes, Europe has issues, not the least of which is the US/China trade war (and you thought I was going to say Brexit).


China happens to be the most important trading partner for many, if not all, European countries, and its economic slowing due in no small part to the trade war makes for collateral damage for Europe.


Allow me to cut to the chase with the following question:


Given what is clearly a global economic slowdown, putting the longest expansion and bull market in stocks in history in serious jeopardy, what in the world has equity traders and investors so sanguine? I mean U.S. stocks remain within spitting distance of all-time highs, and, as I reported last night, futures speculators remain virtually all in.


Well, I think it’s very simple, traders and investors have — right or wrong — concluded that the US/China trade war is the single biggest issue out there, and they realize that the political risk of taking it very far into next year is simply too great to take it very far into next year.


And, yes, I completely agree when it comes to the political risk! I believe that the odds of no-trade-deal come this time next year are very low, although the “quality”, for U.S. purposes, of any deal will be markedly lower than it would’ve been, say, back in May when we thought they had a deal. I.e., China — with no looming election and presumably more stimulus options — seems to have gained an edge at this point.


One more question; and this one’s huge:


Can the global economy hold up for, say, another six months amid no deal, and the real threat of the trade war becoming more violent along the way?


Frankly, I dunno; the data — as we’ve been reporting herein — concerns me. And if the stock market seriously rolls over in the meantime, and takes the consumer with it, well, that’s why the not-so-bullish messaging from us of late.


In fact, no kidding, while typing this note, S&P 500 E-mini futures rolled over on news that suggests maybe there’ll be no in-person trade talks this month after all:





Now, a tweet suggesting otherwise will, we should presume, create a green candle more than matching that red one. Or, on the other hand, a reactionary tweet (as it virtually has to be China balking at the prospects for a meeting) will make for a red candle dwarfing the one in the insert above. Then, give it a day maybe (if not an hour, or a minute), and there’ll surely be a tweet designed specifically to calm, if not boost, the stock market.


Like I said yesterday, good luck if you’re trying to trade this thing…