WASHINGTON. Maybe it’s just the late-August, end-of-summer blahs. But, with many stock sectors treading water on low volume, market averages are slowly sinking Thursday. The usual financial pundits blame today’s market malaise on the usual suspects. These most prominently include escalating China trade tensions and the political spin swirling about post-conviction Michael Cohen rumors and speculation.
Thursday market action
The Dow Jones Industrials spent most of Thursday morning floundering around a modest loss of 100 points, give or take. Currently, at 12:15 p.m., the DJIA remains down about 90 points, a 0.35 percent loss just far. A weak performance by Caterpillar (symbol: CAT) was singled out as a big reason behind today’s drop. It was down 2 percent Thursday morning. Boeing (BA) didn’t look to hot either, as it, too, traded down, this time by roughly 1 percent.
The broader-based S&P 500 looks a bit green around the gills Thursday as well. It remains about 3 points, plus or minus, to the negative side for a marginal loss of about 0.11 percent.
Like the other major averages, the NASDAQ remains weak as well. Yet this highly tech-influenced market average is currently eking out a gain of about 5.72 points to the upside. That’s a palatable but not earthshattering 0.07 percent gain nearly half way through today’s trading session.
China trade tensions come to the fore
With regard to China trade tensions, CNBC notes that the latest Trump tariff threat against China just became a reality this morning, showing that this president not only keeps his promises but also delivers on his threats.
“Tariffs on $16 billion worth of Chinese import product categories took effect on Thursday. Beijing retaliated with its own fresh tariffs on $16 billion worth of imports.
“The U.S. and China held talks on Wednesday that are set to continue into Thursday, but observers did not have high hopes after Trump said he did not ‘anticipate much to be resolved,’ in an interview with Reuters.”
There’s a general sense that trade issues with Mexico in particular and Canada, maybe, will be worked out to a great extent by the end of North American summer. TV’s blow dried financial talking heads also think that Europe will start coming around as well, at least in some trading sectors.
Chinese bait and switch tactics
But China trade is a different kettle of fish, to roll out that old but still useful cliché. They, and pretty much the entirety of the World Trade Organization know that the Chinese regime has flouted the WTO’s rules. They’ve done so from the very day the WTO bent the rules to let the Chi-coms into their club.
Within days, of course, China busily violated every WTO rule they’d just agreed to. That’s typical of Communist governments. They “negotiate” treaties and agreements over a lengthy period of time while they shore up their ground game. Then they sign the negotiated treaty or agreement with broad smiles all around and guarantees of world happiness forever. Then they proceed to ignore and flout each and every provision they just pledged to observe.
What do China trade policies and Charlie Brown have in common?
World leaders should be wise to these predatory Chinese trade tactics by now. But, like that poor sucker Charlie Brown, who falls for Lucy’s football trick each and every time she pulls it, Western leaders have always looked the other way on Chinese trade violations. After denouncing each offense, they always convince themselves that the Chi-coms will eventually come around. Except that they never do.
That’s why President Trump’s approach to the standard Chinese trade policies is proving so unnerving. Mainly to the Chinese. The Xi regime is slowly figuring out that they’ve never seen or dealt with this kind of American President before. They are starting to understand that Trump not going to back off. They seem to be figuring out that their wobbly economy, built largely on thin-air and stolen technology, will get screwed far more quickly than the more robust American economy in this building international trade stand off.
But the Chinese government still doesn’t know what to do. They have always gained total victory by never giving in. What now?
This Chinese trade conundrum also makes Wall Street nervous. Thursday’s stock market action indicates that many traders and investors are still worried about what happens next.
Enter the Michael Cohen rumor mill
Speaking of what happens next… Don’t forget the ugly anti-Trump rumor mill that began again earlier this week with the conviction of the President’s sleazy former lawyer, Michael Cohen. The ensuing ugly rumor mill can’t do much to improve the average investor’s nervous mood. Cohen was primarily nailed for playing fast and loose with money and taxes.
But no matter. This is more about Trump than it is about Cohen, at least as far as the Democrat / MSM narrative is concerned. Apropos of that, we have Wednesday’s incendiary comments from Cohen’s current attorney and longtime Clinton Crime Family consigliere Lanny Davis. Davis hinted that the still-murky history of the Stormy Daniels et. al. hush money payments made by Cohen for then-candidate Trump may have involved campaign finance violations.
Immediately, the IMPEACHMENT fire bells started ringing in the media and on Capital Hill. The problem is, it’s all based on rumor and innuendo. And it has zero to do with Russian “collusion” with the Trump campaign.
Stocks could fall victim to the Democrats’ sleazy Campaign 2018 tactics
Remember: This is all about Election 2018. The Democrats and the Mueller team timed this latest chapter in the Cohen legal saga almost perfectly. They needed this kind of adrenelin to poison the political waters right around Labor Day. That’s when, according to pollsters, voters really start to pay attention to the upcoming fall campaign season. Consequently, the Democrats and their MSM acolytes plan to raise the decibel level of Trump “scandal” coverage steadily until Election Day 2018.
Top Democrats figure that perpetuating the fake narratives already surrounding the Cohen conviction will ensure the triumph of their mythical “Blue Wave” Congressional takeover. The impeachment of President Trump will naturally follow.
For many reasons, this is sheer nonsense. But it’s the Democrats’ nonsense. The odor of real or imagined scandal wafting from the Cohen conviction will muddy the political waters indefinitely. The Democrats plan to dog all GOP candidates with Trump scandal questions on this fall’s campaign trail. It’s probably all we’ll hear about during Election 2018 coverage from now until the first Tuesday in November. The heck with the issues.
Watch out for headline risk in the weeks ahead
Traders and investors must keep an eye on this vicious political nonsense. We’ve told our readers for many months that news headlines afftect stocks in a major way. Between the China trade tensions on one hand, and the never-ending battle with fake political and economic news on the other, the monster known as headline risk – will achieve an awesome stature in the weeks and months ahead.
We’re seeing a preview of this in today’s weak market action. Some of the current negativity is likely due to profit taking after the market’s latest record-breaking highs. But the rest is likely due to nervous investors withdrawing to the sidelines.
A lot of investors profess a hatred of Donald Trump. But they love all the money his policies have made for them since the morning of November 9, 2016.
But the pre-election Cohen conviction rumor mills and the Chinese trade conundrum are beginning to take up more space inside investors’ heads. If enough investors succumb to the incoming and relentless drumbeat of negative propaganda, even in the face of a superb Q2 earnings season, markets will likely get a lot more dangerous this fall.
Curiously, CNBC gave Trump the final word on this, citing his recent, forthright interview with “Fox and Friends.”
“[Cohen’s] legal troubles have raised questions about whether Trump will remain in office. In an interview with “Fox and Friends,” Trump said: “If I ever got impeached, I think the market would crash. I think everybody would be very poor.”
He’s right. That’s exactly what everyone’s getting worried about on Wall Street.
Headline image: Composite photo assembled by the editors.