China Tariff Panic Sows Seeds for Massive Market Rally
In today’s Market Talk, Amber Lancaster, Hudson Cashdan and I discuss:
- How artificial intelligence is making autism diagnosis and treatment faster and more accurate than ever before.
- Why bitcoin is up amid the China tariff panic and currency value drops and how you can benefit.
- Why the future of health care and medicine looks bright thanks to microbot technology.
August 5, 2019
Amber Lancaster: Welcome to this week’s Market Talk. I’m Amber Lancaster, joined by Paul Mampilly and Hudson Cashdan. Each week we look forward to sharing our viewpoints and giving insight into what’s on our radar. Today’s outlook is for the week of August 5, 2019. I’ll begin by sharing with you what I’m watching and then we’ll hear from Hudson and Paul.
Today I’ll cover three major topics. The first will be my take on recent and upcoming U.S. economic releases. Then I’ll highlight my innovation story of the week with our Good News Roundup. I’ll end with the latest performance numbers on our Disruptification Index. Let’s begin.
As expected, last Wednesday the Federal Reserve cut interest rates by 25 basis points. This was a cut mostly seen as a mid-year insurance cut and not the start of continued easing through the year. Based on FOMC sentiment, immediately following the cut, the financial markets did not react kindly.
The markets were anticipating more generous rate cuts for the remainder of this year. Based on readings from the FOMC, the appear to only possibly want to introduce one more rate cut this year, possibly in December. This is what the markets were grappling with last Wednesday until President Trump’s tweet Thursday morning.
On August 1, President Trump stated in a tweet that the U.S. would add another 10% of tariffs on another $300 billion in imports starting September 1, reigniting the trade war between the U.S. and China.
Per Bloomberg, if the president “follows through with the threatened escalation of tariffs, more aggressive counter measures from the Fed will be warranted, possibly as much as 75 basis points of additional easing by the end of the year.”
Following the tweet, check out this current implied probabilities chart. The blue line, which tracks probability of no rate change for the remainder of the year ticked higher to nearly 40% probability. While the orange line, which indicates potential rate cuts moving forward, dipped lower to nearly 60%.
Then immediately following President Trump’s tweet on August 1, both lines diverged significantly. The rate cut line leaped to 100% mark while the blue line plummeted to zero. Now we see that we can possibly expect additional rate cuts from the Fed, not just the mid-year insurance cuts they’ve been suggesting.
To reiterate what we speak about a lot over here at Bold Profits, the economy overall continues to grow. The stock market is near record highs and the job market continues to be robust. In all, we foresee the economy as being in a good position to maintain growth near 2% for the foreseeable future.
This week will be a quiet week for economic releases. There will only be two major economic releases. As you can see in this graphic, on Thursday wholesale inventories month-over-month final print for June will release at 10 a.m. On Friday, PPI final print month-over-month for July will post at 8:30 a.m.
Also this week companies reporting earnings continue to pour in. This week, 166 U.S. companies will report. Some of the largest companies reporting are Disney, CVS and AIG.
My innovation story of the week is focusing on how artificial intelligence is helping the medical field with early autism diagnoses. According to Science Daily, a study led by Boston Children Hospital’s neuroscience division unveiled a machine-learning algorithm that can spot abnormalities in pupil dilation that are predictive of autism spectrum disorder (ASD).
The research findings suggest that, “two simple quantifiable measures — spontaneous fluctuations in pupil dilation or heartrate — could enable much earlier diagnosis of Rett Syndrome or other disorders with autism-like features.”
Unfortunately, autism is often diagnosed later in a child’s life when they’re a few years old. Therapies to help speech and occupational and behavioral disabilities are delayed. But with this new discovery, treatment can start much earlier — as early as six to 18 months.
Next, here are our three good news headlines to carry with us this week. Good News Roundup Story number one: What apocalypse? Retail worker pay hits a 15-year high as U.S. paychecks are surging as big box retailers in some states implement minimum wage hikes. Per Bloomberg, even with inflation store workers are seeing better pay than a generation ago.
Minimum wage hikes by states and major store chains, in conjunction with a tight labor market, have increased incomes. According to the Bureau of U.S. Labor Statistics, average hourly earnings for 13.4 million non-supervisory retail workers increased 5.1% in 2018 for the biggest advance since 1981.
Since then they’ve kept increasing, hitting $16.65 an hour since July. When adjusted for inflation, it’s the highest level since December 2003.
Good News Roundup story number two: According to Science Daily, microbots are showing promise for treating tumors. Per the reporting, a pair of researchers at Cal Tech’s division of engineering and applied sciences are working on an entirely new form of treatment. Micro robots that can deliver drugs to specific spots inside the body while being controlled outside the body.
A professor at Cal Tech states that the micro robot concept is cool because you get micro machinery to right where you need it. It could be drug delivery or a pre-designed microsurgery.
Good News Roundup story number three: As you know, the U.S. Labor Day holiday is just a few short weeks away. This holiday is known for great car sales deals. I witnessed firsthand how good some sales can be. One of my family members was in the market for a new car and specifically waited for Labor Day.
They visited the dealer on that day and were able to get $7,000 off the sticker price of the current year model. According the Consumer Affairs, the average auto loan rates have hit their lowest point in 2019. Many dealers are doing whatever it takes to unload the 2018 models. Edmunds is reporting that 35% of July’s buyers got an interest rate below 4%.
Turning to our Disruptification Index, as this table shows, our index continues to outperform major indices year to date. It’s up 29.9% versus 20.6% on the Nasdaq and 13% on the Dow.
Before I wrap this up, I want to remind everyone as I did last week that our 18th annual Total Wealth Symposium will take place September 12-14 at the beautiful Amelia Island, which is right off the coast of northern Florida. For more details, visit totalwealthsymposium.com. Paul will be there, Hudson, myself, Ian and other members of Bold Profits team and other gurus in the divisions of Banyan Hill Publishing.
You can meet and greet everyone in person and hear some fantastic ideas from each person. We look forward to seeing you there. Again, totalwealthsymposium.com for more details. That’s it from me. Hudson, tell us what you’re watching today.
Hudson Cashdan: Thanks, Amber. I’m watching what’s going on with the trade war with China and the next phase, which has become a currency war. There’s a lot of talk about who pays the tariffs that we’re putting on.
The traditional view is that the consumer pays because you are buying a product that has a tariff, the tariff is 10% so now the product is 10% more expensive. That’s a basic, simple view of it. If you don’t go any further than that, it’s actually true.
But if you’re looking at how things really work, what you’re seeing is the U.S. puts a tariff on Chinese goods. China responds by devaluing their currency and making the cost of those goods 10% lower to counter the tariffs. Now you have 10% cheaper import price, but a tariff on top of that.
Essentially the price is being brought back up to where it was originally. Who is paying in that situation? In that situation, it’s not the U.S. consumer who is paying because the U.S. consumer is getting the goods for the same price they did before it’s just in a different manner. Who is actually paying are the Chinese individuals and businesses who are sitting on a currency that’s worth 10% less.
They are a massive importer of oil, food, iron ore and other resources. Now their profit margins are being impacted and their consumption basket is being negatively impacted. In reality, I would say that the Chinese are paying for these tariffs at the moment. How long they can continue to pay for them is the question.
I think they can go for a little longer because they have accumulated reserves which they can use to stimulate their economy. For now I think the next response will be from the Fed. They will say, “OK, we see your devaluation and we are going to ease ourselves.” That could be good for the market at some point.
In the short term, it’s disconcerting to the market to see this uncertainty and this situation play out. I think the market will start to factor in the good news on the other side of this. The market is weighing all this new information and I think the thesis that will emerge is exactly what Amber said and I think it will be a good opportunity to buy some things a little cheaper. That’s what I see going on in the trade war, it’s also a currency war now.
The IPO market is a little slow this week. We have one coming from China which I want to stay away from for all the reasons I just stated. We’ve been wisely staying away from most of those and they haven’t done well. We have an Israeli plastic surgery company that I’m looking into but I’m not too positive on.
It’s summer in the IPO market and it’s a slow week. I think things will pick up after the Labor Day holiday.
Paul Mampilly: All the investment bankers have gone on vacation, in other words.
Hudson: They are on vacation and a lot of the buyers are also on vacation in August. Companies who come to the market don’t want their potential buyers to be at the beach, they want them sitting in their seats. We saw this around July 4 as well.
Paul: I’m going to parrot a lot of what Amber and Hudson have been saying. We’ve gone through in the four years since Profits Unlimited started, if I made a list of all the panics we’ve gone through — there’s actually a person who tweets out every time there is a panic and counts the number of 5% declines we’ve had in this bull market.
I think we’re nearing 100. It’s gotta be close. By my count, I think this is tariff panic number three or four we’re experiencing. What I saw happen after the Fed did their interest rate cuts is what often happens in the stock market. You buy on the rumor and sell on the news.
Then President Trump decided he would take it up to another level where we’re going to tariff everything. I feel like we’re now near the end of this tariff war. China is hurting and our farmers and folks in the U.S. who trade with China are hurting. However, it has a fairly small impact on our economy.
It has a way bigger impact on China than it does on us. I know many of you will tune in to this Market Talk to see if we are still positive and if you should sell everything. Should you just simply press the eject button on all your stocks? Please, calm yourself down. We have gone through this before.
In addition to that, I would tell you the vast majority of people who are going to sell during this are the same people who sold in panic number one or panic number two and then there was a whole bunch of selling at the end of 2018.
From everything Amber is telling you, Hudson is telling you, what I’m seeing, the basic conditions are ripe for a massive rally. Think about this: no one expected on Christmas Eve that stocks would go up from December to June and make new highs. Everyone can give you 100 reasons why you should stay out of the market and panic, when it paid to go about your business and think that the basic conditions were right for the bull market to continue.
I think it can actually get to the next level because so many people who allocate money to stocks have sold out for the inverted yield, the Federal Reserve, recession, crash, trade tariff — whatever you want. They have piled up cash. I think it’s a massive amount.
We are talking about money that’s supposed to be allocated to the stock market. Because the basic conditions of low interest rates, growing economy, low inflation, we’ve got these enormous megatrends worth trillions of dollars — Internet of Things, AI, Robotics, block chain. We have a group of young people just arriving at their biggest pay days.
They’re getting to 35 and above and they are getting pay raises. If you talk to them, they would tell you they are optimistic. That’s because their paychecks are rising, the opportunities are rising. For all these reasons I would tell you to stay positive. I believe this market will go up and it’s going to go up a lot more than people think.
People who are panicked, yes on days like today when I just checked and the market is down, you will feel temporary relief, but then you will feel envy and regret. You will wish you had the courage and conviction and belief to stay in and be the strong hands.
Hold your stocks and hold your nerve because I believe higher highs are coming. I know a lot of you will have tuned in for this and I wanted to make sure I got that message out to you.
Circling back to what Hudson was talking about, those of you who have been following Market Talk and this channel know that I have been following Bitcoin and Hudson is also involved in crypto. You will see that the moment China did what Hudson talked about, what happened to Bitcoin?
It went straight up. I bring this up because we are working on an incredible new project where we are going to bring the world of money including block chain, crypto and a bunch of stocks to a new report. It’s something I’m working on for some time in September.
In the meantime, I also want to tell you about True Momentum that through the panic in 2018, it barely laid a finger on it. I looked this up, we’ve got five stocks right now with open gains in excess of 100%. The top one is 230% and that’s just been in the portfolio for about seven months.
It really does pay to be positive. If you’re thinking of joining True Momentum, my publisher is sending out promotional emails. If you’re interested and want to get in this service, wait for those emails. Stay positive. Come and check back in with Market Talk. Subscribe to this channel. Back to you, Amber.
Amber: Thank you, Paul, for those words of encouragement. Thank you, Hudson, for your wonderful insight. Thank you to our viewers for tuning in this week. We wish you a productive, pleasant wonderful week. Until next time, take care.
If I had a list of how many times I’ve encountered a market panic since I started my first service, Profits Unlimited, it would be long enough to wrap around the world.
And today, I’m adding another mark to the list thanks to “Trump Tweets.”
It seems that every news and media outlet is jumping at the chance to incite a panic over the president’s recent Chinese tariff promise.
Since his tweet announcement, the markets have taken a hit. Many readers like you are writing in, wondering if we should sell.
But my team and I want to reassure you that this tariff panic is only temporary. In fact, the market is strong and ripe for a huge rally. Holding strong hands during this time will only lead us to massive gains in the near future.
So, to keep you from the fear of missing out, we want you to stay strong and hold on. Your positions will come out of this short slump related to the China tariffs even better than before.
And if you want to be one of many people sitting on active gains of 154%, 188% and 225% during this upcoming rally, then be sure to check out True Momentum by clicking here now!
This week, we also discuss:
- If you’re looking for Ian Dyer’s market update, look no further than the Paul Mampilly YouTube channel. Ian’s bringing you his own Bold Profits Daily video every Friday! Click here to see last Friday’s update on the Fed’s rate cut and its impact on the markets.
- As market makers and investors take their vacations in the weeks leading up to Labor Day, the IPO market will be quieter than usual. But that doesn’t mean that Hudson and I aren’t keeping a close watch out for the best and most promising new IPOs for you to invest in.
Editor, Profits Unlimited