Stocks Decline – End A Great Week On A Bad Note
The stock market sold off sharply on Friday as the S&P 500 fell 0.92%. Nasdaq fell 1.65%, and the Russell 2000 fell 1.82%. VIX was up 3.83% to 17.36. CNN Fear and Greed index fell from 29 to 18 which is extreme fear.
This makes me bullish on stocks in the short term again. In particular, this index helped me avoid going bullish into this selloff.
I think the selloff on Friday was partially because stocks had rallied too much too quickly. And also partially because of the statements on trade made by President Trump’s trade adviser.
With negative news on trade coming out, traders didn’t want to go into the weekend-long the market. News on trade will continue to come out in the next few weeks. So get used to this volatility. I’d rather hear some news than no news. It means work is being done on a deal.
Stocks Decline – The negative statement from trade adviser Peter Navarro sent stocks lower.
Peter has long been a hawk on trade, so his comments aren’t surprising. However, investors hope some sort of progress on a deal with China is being made. So whenever he splashes cold water on that idea, stocks fall.
Specifically, he said “As part of the Chinese government influence operations, globalist billionaires are putting a full-court press on the White House in advance of the G-20 in Argentina. The mission of these unregistered foreign agents … is to pressure this president into some kind of a deal. How do you have a deal with somebody if they don’t even acknowledge your concerns”.
I don’t ever expect Peter Navarro to change his hawkish tone. But I do expect a deal to get done early next year. This statement doesn’t change my view.
Both countries will be hurt by the trade war. Also, both economies are slowing. Therefore, there will be extreme pressure on both sides to get something done.
As you can see from the chart below, 138 firms have mentioned tariffs on their conference calls through November 7th. This is slightly less than the 157 mentions through August 7th in Q2. I wouldn’t take this modest decline as a positive signal.
