Episode: Tech Props Up U.S. Markets – But For How Long?

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Tech Props Up U.S. Markets – But For How Long?

The picnic continues for U.S. equities this week – even as global markets, in John’s words, “continue to be awful” with the London Exchange down 2% for the week with Germany giving back 3%. Both those markets are down for the year – but they’re getting off relatively easy compared to Shanghai, down more than 16% for 2018.

Yes, the S&P 500 gave back 1% while the Dow was off a fraction – and the Nasdaq 100 even lost 3% – but all those indexes are still up for the year, including the Nasdaq 100, whose 16% gain makes it a mirror image of the carnage in Chinese equities. 

On this week's episode of the Stansberry's Investors Marketcast, the hosts discuss how recent weeks have been a "picnic" for U.S. equities. 

So a solid performance, all things considered – but are cracks forming in the tech veneer? Scott breaks down Friday’s economic numbers, from Finisar to Palo Alto. Facebook has a problem that’s very Facebook-specific for now – but its big weighting in the tech indices will drag them down, even as a handful of stellar individual companies continue to charge ahead. 

John covers the beating that some tech giants continue to take in Washington – “As far as Facebook and Twitter were concerned, in front of the House Intel Committee, they looked like they were told to go stand in the corner.” Google’s also down $120 from its peak – and even Amazon’s 3% dip amounts to $30 billion lost on paper last week. 

The talk turns to trade battles, and Scott’s assessment is that the next $200 billion tariff broadside is coming. The only question: whether or it it’s leveed at 10% or 25%. 

Meanwhile, look out for the scenario Scott floats where these proposed tariffs finally hit the tech sector, with consumer brands like Apple caught in the line of fire. 

Greg points out that the U.S. trade deficit with China has just hit an all-time high, and how this strengthens Trump’s hand. But when does this divergence catch up to the U.S. markets? Students of history will conclude that, because of globalism and heavy correlations between economies, a major warning sign is brewing. 

Just look at 2017. “Every single market around the world rallied in tandem with each other. They all did.” But go up as one… go down as one. 

Scott concurs. “I think we’re a trade headline away from the markets selling off. It’s really tenuous.”

John says that investors need to be watching the dollar for signs of a deal, and Scott breaks down the motives on each side for the next trade meeting – as well as his biggest fear based off of the events of the last two weeks. “My concern is – is he pressing for too much. Are we going to go too far – and do heels get dug in?” 

John games out how the politics of midterms can affect our standing in the trade war – and makes his own prediction on the “Blue Wave” pundits are forecasting. 

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