October’s Stock Market Decline: An analysis

November 15, 2018 3:52 am Published by Leave your thoughts

Stock Market Decline

Last month, we saw the most significant decline in stock market performance since the Great Recession ended. For most of the year, we heard warnings to exit emerging market equities. Securities markets in developing countries first became susceptible to US tariff wars a weakening Chinese currency. Foreign investors were selling their shares and opting for haven currencies of the US dollar (USD), Japanese yen (JPY), and Swiss franc (CHF). So many factors at work provide few answers to more suitable products.

Global Commodities Markets

The commodities trade wars have been ongoing between China and the US. There doesn’t seem to be a laid-out strategy. Our approach to foreign trade agreements seems to be much more about US Treasury and Commerce settling a score of some long unaddressed economic claim. China canceled 80% of annual orders of soy supplied by Midwestern farmers and have already made new trade deals with other countries to source the beans. Even Russia and China are growing closer ties.

Trump’s Global Disposition

Then there are the verbal warnings and personal insults launched by President Trump against several of our strongest allies and trade partners. Leaders of Mexico, France, Canada, and Germany seem to be confused by the sudden anger of the President. He even allegedly tore into Theresa May on a phone call over mid-term election results.

Trump’s Enormous Deficit

A record corporate tax cut took effect last year, leaving billions out of the hand of the Treasury to run the government. Meanwhile, spending has increased exponentially. We have therefore seen a 60% rate increase in the federal budget deficit from a year ago. The projected deficit for 2018 alone is $984 billion.

Trump’s Media War

The White House has been at war with the media constantly, recently revoking Secret Service clearance to Jim Acosta. CNN filed a lawsuit against the White House leading to amicus briefs being filed by multiple news networks on behalf of the journalist. He made missteps with the 100th anniversary of WWI in France and, when it became an embarrassment, fixed blame on the Secret Service.

Trump vs. The Constitution

Democrats have successfully sued Trump for violation of the emoluments clause of the Constitution involving his Washington DC hotel. Special Counsel Mueller’s investigation has issued indictments left and right as the knot winds a tighter around Donald Trump, sinking through his inner circle. So much of what you hear about Congress is a fight, with one side accusing the other of breaking the norms. Kavanaugh’s controversial Supreme Court appointment after accusations of sexual assault, which exit polls have proven cost support among suburban women voters.

Democrats Win Against Republican Control

Democrats have control of the US House once again and, are in fact, continuing to win seats a week later as final votes get tallied. Blue dots on electoral maps are appearing in close races for traditionally Republican district seats. Although the newly elected Congress member won’t be seated until January, present-day House members are already planning an ambitious agenda for freshly gained power in Congress.

They want to go after Trump, and it’s clear that the mounting pressure is beginning to take effect. At present, there are disputed governorship elections in Georgia and Florida and Senate seats in Mississippi and Florida. Judges that are ruling on lawsuits over ballot recounts in Georgia and Florida are warning him among state politicians to calms down the rhetoric. Other “close-call” races scattered across the country in a referendum vote on the Administration. Some Republican voters have scampered left as moderates to curb a rise in white nationalism that identifies itself as conservative and its voters register Republican. Add in record voter turnout among young adults, and many are calling the dramatic shift from the 2016 elections a “blue wave.”

Will Trump War with a Democratic House?

What we do not know is where it is all going. What we do know is that the major market composites and indices not be sinking into correction during an economic growth period buoyed by historically low unemployment. Even the reliable “FANG” name stocks have taken a significant loss. I witnessed double-digit gains in commingled, LP funds less than a year ago. Now, some long securities in the same markets had negative returns between 5%-10% for October. MarketWatch

Some analysts are speculating whether we could face another recession within two years. However, in the near-term, it’ll be interesting to see how or if the market responds to subpoenas related to suspected Russian influence on the 2016 presidential election. Will legal proceedings against a sitting president further dampen the economy? Many questions remain unanswered. I do think that even if the President doesn’t last until 2020, new laws that Congress passes over the next two years will have the most significant influence on the markets, including the rumored tax-cut rollbacks planned by the Democratic House.

Tags: , , , , , ,

Categorised in:

This post was written by Daniel Jones

Leave a Reply

Your email address will not be published. Required fields are marked *