WASHINGTON. Okay. Our headline is a bit misleading. But only slightly. Prior to the opening bell Wednesday morning, stock market futures indicated a return to Monday’s awful bearishness, just as we predicted in Tuesday’s column. And indeed, the Dow plunged nearly 200 points after trading opening at 9:30 a.m. ET. But then, a Wall Street miracle occurred, as CNBC reports. The Trump administration essentially told traders and markets to rally on.
“The Trump administration plans to delay auto tariffs by up to six months, stopping itself for now from widening global trade disputes, four sources told CNBC.
“The White House faces a Saturday deadline to decide whether to slap duties on car and auto part imports over national security concerns. After Saturday, the administration would have another 180 days to come to a decision as long as it is negotiating with its counterparts.
“President Donald Trump sees the tariffs as a way to gain leverage over trading partners such as the European Union and Japan during ongoing talks. But the president risks sparking fresh global trade clashes if he goes through with car duties. The European Union, for example, has already prepared a list of retaliatory duties to implement if Trump targets autos.
“Stocks gained back their their losses Wednesday following news of the administration’s plans, which were confirmed by a source briefed on the talks, an administration official and two foreign officials. Shares of automakers such as Ford and General Motors jumped.”
Trump waves his magic wand, and voilà! A Wall Street market miracle occurs
Actually, if nothing else, today’s Wall Street market miracle, at least thus far, confirms President Trump’s ability to move stocks in either direction almost as if he were waving a magic wand. For example, stocks plunged en masse for roughly three trading days in a row (including Monday’s downside disaster.) Why? Trump’s vigorous tweetstorm denouncing what even Democrats agree was Chinese backtracking in the latest round of US / China trade and tariff talks.
Now, we’re dealing with today’s Wednesday Wall Street miracle, at least thus far. The White House put out the word that the President is likely to hold off on his current threat to hit the Eurozone’s auto industry with punitive tariffs, as well he should. The Europeans have been BS-ing the US for month about improving their trade policies vs. this country. But, as usual, they’ve 86’d that false promise, focusing instead on obliterating Europe’s nation states with an ongoing “World War Z” mega-wave of hostile immigrants.
The end of the road for Eurozone socialists and Chinese technology theives?
These European nations, individually or collectively, have managed to keep the Marshall Plan going, in a way, eviscerating their armed forces and taking US taxpayer money – via their own tariff regimes – all to subsidize the lazy, socialist, statist government bureaucracies they’ve created since at least the late 1950s. They don’t want the US feedbag cut off. But Trump does and rightly so. Hence the auto tariff threat.
However, this administration, for all its bluster, does have a sense of proportion. As the Chinese trade mess heats up worse than anticipated, there’s no point in waging economic warfare on the European front. At least right now. Hence, the likelihood the Eurozone auto tariff regime gets put on hold this weekend.
The Trump administration will need to revisit it at some point, as the EU will do absolutely nothing unless forced. The countries in the EU, like the Communist Chinese, have long grown used to the US caving, and still expect that to happen. You literally have to beat these international elitist bureaucrats about the head and shoulders to get them to even listen.
But the longer President Trump can hold onto the White House, the more both the Chi-coms and the European snob-ocracies will be forced to adjust and get real about their 100 percent US-hostile trade policies.
China first, Europe later
Again, however, now is not quite the time for the Trump administration to take on the Eurozone. Although the faux-socialist Euro-jerks in the EU leadership richly deserve it. (And increasing numbers of their own people agree.)
That’s because China is still front and center on the trade front. Which gets us back to Donald Trump’s remarkable ability to move markets up and down instantaneously. As evidenced by today’s latest Wall Street miracle.
When word (purposely) leaked out Wednesday morning that the Trump administration was likely to put the Eurozone auto tariffs on hold for up to half a year, Wall Street’s gloomy bulls suddenly got jolted with trading adrenaline. They reversed the day’s early plunge, chased the bears right out of town, and currently (as of 1 p.m. ET) have goosed the Dow back up over 100 points from Tuesday’s close.
As always, no guarantees. That’s always been true in the stock market game. But somehow, in today’s high-speed trading, algorithm and headline-driven trading environment, that old truism is somehow even truer.
What to do with our nervous portfolios
We’re still jettisoning investments that look likely to lag or plunge in this dicey environment. But we’re sneaking in a few shares here and there of conservative ETFs that don’t get rocked too much if things decide to get bearish in the end. ETFs like the Equal Weight S&P 500 tracker (trading symbol: SPLV). The Equal Weight S&P 500 technology index (RYT). Or the Schwab Large Cap Growth Stock ETF (SCHG).
All these have been real heroes for us over the past year or so. And so we continue to hold, or add on significant dips. One or two shares at a time, since these are commission-free ETFs, at least at Schwab. (Other brokerages offer similar deals on either the same, equivalent, or different ETFs.
We also continue to hold our overweight positions in preferred stocks. Yields are good-to-great, though rarely record-setting. But those checks come in every quarter. And better yet, most of these preferreds don’t move very much up and down, even in violent markets. Last fall was an exception of course.
But since then, our preferreds are all back in the green, some quite nicely. They are what our favorite preferred stock advisory columnist Tim McPartland would call “sock drawer” stocks. You can generally put them in your sock drawer and forget about them. Which is nice in a crazy market like this one that moves with great emotion on every Presidential tweet.
Final words on “investing by tweet”
I’ve never experienced a market where a US president’s daily pronouncements can move stocks in a significant way. But, as in life, there’s always a first time. And we’re seeing that time right now in a market that seems to care more about headlines – fake or not – than it does about growth and earnings.
See you tomorrow. Or even later today if another headline seriously reverses our current observations.
– Headline image: Image of President Trump via whitehouse.gov. Public domain.