Off the Rails
US equities had its worst week in a decade, down -8% on average. So far, it is also the worst December since the Great Depression. There were bad tidings everywhere and a government shutdown is already underway.
There is a smorgasbord of bad news and here are just some of the main courses:
- Interest Rates were hiked again by the Fed (fourth time this year)
- A trade war with China is gearing up
- A Government shutdown has begun along with a showdown on Capitol Hill over the border wall
- Isolationist Policies by the Trump administration is leaving power vacuums in the Mideast Europe, and Asia
- There are No Seasoned foreign policy advisors in the White House after Defense Secretary Matttis’s resignation over policy disputes
- Fed Chairman Powel is under pressure by Trump and could be terminated for raising rates, which if happens is not good for the Feds independence and market perception
- Mueller Investigation still lurking over the President
- The European Union and NATO’s future is in question while leaving Putin’s aggressive actions unchecked
What is getting lost in this week’s new driven market meltdown is that Bridgewater’s economic forecast for 2019 and 2020 is showing a US economy growing at just 1%, not the 2.3% that the Fed has on tap for next year. If that forecast is correct, then the bear market for stocks might just be gathering steam.
This week’s takeaways are:
- Risk Gauges are at full risk off and getting worse
- Sentiment gauges (VIX) have yet to hit capitulation levels (which would indicate a tradable bounce is here)
- Gold (GLD) partied like it was 1979 and acted as a safe port in the storm (it also broke out of its long-term downtrend versus the SPY…let’s see if it real)
- Emerging Markets (EEM) could be the place to head to, but only after the dust settles
When markets trade with this level of volatility, short term tactics used by floor traders (MarketGauge’s DNA) are critical to manage risk and profit from the wide swings.
This week we announced a brand-new program (The Complete Trader), which will help you make 2019 your best trading year ever. It is designed specifically to profit from current conditions which will most likely persist for the foreseeable future.
If you’d like to see the replay of last week’s webinar that introduced our new Complete Trader program click here