It can’t come as any surprise that the stock market’s lofty balloon ride during the past couple of months fell because of a few words this week. It only rode up on sweet tweets by Trump about trade, which created a thermocline for it to ride. So, of course, the market plummeted this week in the unexpected downdraft of Trump’s out-of-the-blue statement that his trade deal may be a year away … even for phase one.
I don’t know if ignorant traders drive these vain accessions and declensions or just ignorant machines that have no ability to discern truth, so blindly they take all presidential headlines at face value.
Who could be surprised that stocks got off to their worst December start since the beginning of the Great Recession when Trump said a trade deal might best be shelved until after the 2020 elections? It was, however, apparently a fleeting horror to those who had actually believed Trump about a phase-one deal being imminent this month. One could only watch the surprised reactions with amusement, given there was no reason there should have been any surprise at all.
Even if the market’s downfall was all algo action, those algorithms would all be rewritten if actual people actually cared about truth or reality. The people who own the bot traders would rewrite their algorithms based on what anyone can easily learn from the present negotiations — rewrite them to ignore all that is said about those talks as fluff and price in the current actual economic damage of the trade wars and the lingering damage from the Fed’s recent experiment with tightening its balance sheet.
We all know there is not much more on the table in phase one with China than a cessation of additional tariffs in exchange for some more agricultural purchases by China and maybe another sweetener or two, maybe a relaxed tariff here or there. That means we also all know the damage from the current tariffs is going to continue for a long time because right now we are struggling just to get the easy stuff out of the way.
If people were interested in truth and reality they’d recognize that. They’ve had well over a year to watch the damage from tariffs relentlessly build; and negotiations and talk of tariffs began two years ago. So, if it takes about two years to negotiate the easiest parts of a deal with China, everyone has to know that it is going to take a whole lot longer for all the president’s men to hammer out a deal over the hard stuff that Trump has stated many times is necessary in order for him to remove all present tariffs. That clearly makes it past time to just factor tariffs in as long-term trade troubles.
Read the rest here: http://thegreatrecession.info/blog/what-went-up-came-down-and-up-and-down/