About crisis symptoms in the markets – while the US stock indices are still trading within sight of the all-time highs
If you look at the absolute price level of the major Wall Street indices you might think “business as usual”. A small correction but in combination with other indicators you get a different picture.
Here is a brief fact check:
- The Dow Jones Index which Donald Trump has so highly regarded has only fallen by four percent from its all-time high. But it has been falling for the fifth week in a row and this was the last time in 2011. Investors are increasingly aware of the dangers of a global downturn due to the escalation in the trade dispute with possible ubiquitous collateral damage.
- More than half of the S&P 500 companies are already in correction mode (-10%).
- If you want to judge a tightening or easing of the trade dispute you only have to look at Apple’s share price.
- The global manufacturing index has been falling for twelve months in a row. This is the longest period of losses in 20 years.
- The Ifo index which is so meaningful for Germany has been falling since August 2018. 10 months with only one exception.
- Now US retailers are feeling the inflationary and business-damaging effects of the tariffs.
- The retail index is also falling for the third week in a row.
- The strongest sectors on Wall Street are suppliers, real estate and consumer goods for daily use – typical shifts before crises.
- The markets want a trade deal and the White House wants China to give in. Both contradict each other.
- The US bond markets are rebelling and pushing bond yields down. Earlier than the Fed could do with a rate cut that is almost routinely behind the curve.
- 10-year US bonds reached their lowest level since 2017.
Donald Trump has so far only reacted with a planned aid package for US farmers amounting to 16 billion dollars. But they want “Trade not Aid”. Two days ago a selloff was seen on the world’s major stock markets. You can feel the consequences of tariffs and sanctions on the system of global supply chains. And who has it unfortunately in his hands – Donald Trump. On Wall Street for example the sarcastic slogan was kept: “The markets are only a tweet away from new all-time highs or from a slump of over 10 percent. At the moment there is evidence for the second variant.
Economicly Trump could be the burying stick after 24th of June (the end of the trial period) when he will levy duties on the remaining $335 of Chinese imports. In view of the weakness of the big retailers in the USA this is already a slightly “suicidal” reaction of defiance. Hasn’t Secretary of Finance Mnuchin just called Wal-Mart’s CEO?
The next tweet from Trump could again trigger a violent price reaction. If it would be just foreseeable – some traders might think…