The Dangers Beyond the
China-U.S. Trade War
Harry Dent | May 08, 2019 | U.S. markets have had a bad week. After reaching all-time highs recently – the Dow at 26,656.39 on April 23 (not quite new high), the S&P 500 at 2,945.83 on April 30, and the Nasdaq at 8,164 on May 3 – they’ve spent the last three days in the red. Monday, the Dow shed as much as 1.8% before pulling back to close only slightly lower. On Tuesday it had bled 1.8% by the close. The Nasdaq dropped 2.2% during trading on Monday before clawing some of that back. It ended trading on Tuesday 2% down. In fact, the Dow had its worst day yesterday since January 3. From the sounds of it, investors are unhappy with The Donald’s China trade deal tweets on Sunday. Really, they could have chosen any issue at hand – there are so many – for a reason to correct, but a correction was due regardless… because a pause is needed before the final blow-off rally in my Dark Window scenario. All the “good news” lately – the lowest unemployment number in the last five decades, average hourly earnings up 3.2% over 2018, first quarter GDP of 3.2%, as Rodney mentioned yesterday – hasn’t given investors sustained confidence because… well… most of them know, like us, that it’s all B.S. Employment numbers, GDP “growth,” stock market highs… none of it has any fundamental foundation. It’s all the result of Fed stimulus, the resultant stock buy-backs binge, and then The Donald’s tax cuts last year. In fact, despite the good Q1 number, our real cumulative GDP growth over the last 11 years has been worse than GDP growth during the Great Depression (19% between 2007 and 2018 compared to 20% between 1929 and 1940). The fact of the matter is, any connection between the markets and the economy is now tenuous at best. Stocks are 120% overvalued versus my proven Spending Wave, with all of that due to goosing earnings per share versus total earnings through stock buybacks. And that sets us up for the worst kind of thrashing when this bubble bursts. What Most See… What Most Don’t What most people see is that the Fed stopped printing money by late 2014, after tapering their printing gradually over a year. They see that the Fed started raising short-term rates in December 2015. And they see the large corporate tax cuts at the beginning of 2018. What most people don’t see is the global picture… READ MORE »
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