Backlash of Trump's Cockiness - Note of Caution

Quick Catch up

Unless you have been hiding under a rock, you know that President Donald Trump is waging a an economic war against China. This war has been going on for well over a year now, and has taken a toll on U.S farmers. The market has started to react to the trade war again like it did in December 2018. This time, there are more challenges that could pack a punch that is powerful enough to land the market on its back.

Americas losses are adding up

U.S Farmers have been not only seen soy imports slow down over the course of the year since China and the U.S have been at this trade war. In fact, some have not seen any business activity since Trump's reaction on twitter.

The Pain

Since the recent threats by the President to add a 10% tariff on the final items effective September 1st, the market has had more volatile days bringing the total losses since the announcement to about 4%. This has resulted skittishness by the market watchers. Of course, no one wants to be the fool in a game of chicken where the greater fool is the person that buys the breakout that has no follow through. 

Government interference in the Market

The Federal Government , Donald Trump has used his twitter account to wreak havoc on the United States consumer with erratic twitter rants that require psychologists in some cases to decipher. These rants are not limited to calling the Fed President (Jerome Powell) Clueless,

The Fed

The last time we heard from the FED president, he confused the market by saying that he was easing the interest rates by 25 basis in what he termed a "Mid cycle adjustment". This language rattled the market and caused a few volatile days that had the fear index wake up from a protracted lull. We are on Fed watch this week, and are essentially waiting on the Fed president to clarify his justification of the last rate cut. Any explanation that doesn't satisfy the market will be an open invitation to short sellers. 

Inversion of the yield curve & Jitters

The 2 year treasury bonds and the 10 years treasury bonds inverted last Friday. This rare occurrence caused the market to begin worrying about a looming recession. 
The market uses history for the most part to predict the future because of course, we operate under the premise that history repeats itself in the market.

Conclusion

Look before you leap
Technically, the yield curve did not invert, but phew, we escaped it that time. The question is how many more times will be get this close before the 2 year crossed above the 10 year?
Use stops to protect yourself at all times.. you are just a market participant a prawn in an ocean full of sharks and whales. 

The backlash of Trump's cockiness could start to take a toll on the U.S consumer confidence at any whiff of inflation.