It’s been a tough three days for the bulls that is about to get worse as China retaliated for Trump’s tariffs with a series of their own. Their currency, the yuan, also fell below what analysts have deemed “critical” levels. It has long been argued that by weakening their currency, China has been able to partially offset the impact of the tariffs.
I won’t get into another diatribe about how I detest and hate using tariffs as part of economic policy. It’s flawed and failed thinking where they are only losers. No one wins a trade war. The Chinese have patience on their side as they can just wait for the 2020 election and hope they negotiate with another administration. They already know the worst case scenario.
Trump on the other hand will have a tough time over the next 14 months as the economy will weaken. However, he will very artfully pander to his base and blame the Fed for not lowering interest rates quick enough. One thing is for sure, it won’t be quiet.
Last week, I wrote about two price levels on the Dow that were key, 26,400 and 25,000. The former was breached and held on Friday, but given the weakness overseas, our markets are looking more than 1% lower this morning. As you know, it’s more important where they close than where they open, but today is setting up to be an ugly one for the bulls.
