Another Volatile Day

By: Kent Engelke | Capitol Securities

Perhaps the two most misused and over-used words are iconic and tectonic. I would like to focus upon tectonic as it relates to today’s geopolitical, socioeconomic and monetary environment. The changes in all three are indeed tectonic, defined as “earthly supporting structures and the processes that takes place within creating massive change.”

Globalism has been replaced by economic nationalism at both home and abroad. If globalism was the path to equality, why is national and global inequity rising and according to some, is at the greatest disparity in history? Why has US growth averaged about 1.5% during the “Golden Age of Globalism” in the 8 years from 2008-2016?

A strong argument can be made that globalism only aided the elitist, not mom and pop. The Establishment is doing everything possible to maintain its power, influence and wealth, often belittling those who don’t share their views as small brained, unenlightened, uneducated Neanderthals.

Generally speaking, Economic Nationalists are the middle class; the populist that generally believe small business is more accommodative to the needs of society and is the pathway to a comfortable lifestyle.

Since the Economic Nationalist wave commenced in early 2016, global growth accelerated and all the OECD countries are undergoing their first synchronistic recovery in over 10 years. To place this recovery into proper perspective, the last such recovery occurred in the late 1980s.

Wow! This is the inverse of what the Intelligentsia expected. Growth and income equality was expected to surge under a globalist environment.

The Economic Nationalist movement, or the predominate economic philosophy of the last 2000 years, is gaining strength, strength in regions where globalism was supposed to have its greatest inroads.

By definition this geopolitical and macroeconomic change is indeed tectonic.

Regarding monetary policy, QE has been replaced by QT. The entire developed world was experimenting with QE, the results of such is far from the intended consequence, defined as growth forecasted to be around 3%-4% versus the 1.5% realized growth. This change in monetary policy is too tectonic.

The above has to do with everything in the market. The rules have changed. The major issue at hand is that mega-sized business is geared to the rules of globalism and ultra-low interest rates, not to the rules supporting economic nationalism and rising rates.

President Trump is despised by the left and the right, The Establishment, The Progressives, The Elitists, and The Intelligentsia. Trump is a populist. He is not the first president that espoused such ideas, but the first in about two generations, the result of great wealth inequality, facilitated by globalism and the narcissistic merging of big business and big government.

Because of this tectonic change in the populace attitudes and the possible polices supporting such change, volatility is rising. There has been nine consecutive days that the NASDAQ has moved 1% or more, the greatest period since the commencement of the Great Recession ten years ago.

Yesterday’s volatility was the result of a possible rising trade war with China or the further implementation of possible policies that fosters Economic Nationalism over Globalism. Equities erased large losses and ended moderately higher following comments from both China and the Trump administration that the door is open to a negotiated solution. The Dow swung over 700 points from its early morning lows to the afternoon close.

What will happen today? Tomorrow the all-inclusive BLS Labor report is issued. There was little reaction to yesterday’s release of the ADP Private Sector Employment survey that indicated the private sector created considerably more jobs than anticipated in March. February’s data was also revised significantly higher.

Wow! This is not supposed to occur under an Economic Nationalist environment, an environment that champions less regulation and Mom and Pop America.

Last night the foreign markets were up. London was up 1.49%, Paris was up 1.98% and Frankfurt was up 2.29%. China was down 0.18%, Japan was up 1.53% and Hang Sang was down 2.19%.

The Dow should open nominally higher as tensions regrading a potential trade war fall. The 10-year is off 4/32 to yield 2.82%.

One thought on “Another Volatile Day

  1. I think the whole China upping their tariffs idea is a tempest in a teapot.

    An very out-sized portion of US Agriculture is owned, grown and run by Big AG, the bankers, the lobbyists and the politicians who take all of their campaign contributions. Cyclical crookedness at its finest. Their are some littler guys that may take a short term hit but most of the “TRUMP IS STARTING A TRADE WAR, OMG” noise is coming from Big Ag and their crooks in on the global game. All the crooks who control what commodity goes to what country to maximize their profits will continue to scream like a chicken headed for the chopping block. F em. USA pays the most because of the SNAP scam.

    I would love to see POTUS scrap ethanol in gasoline to 0 or 5% max. Man, the screams would be deafening from the above mentioned crooks as their cut would go way down. With or without NAFTA, which I think DJT will cut, Mexico is going to buy corn be it from the USA or elsewhere. Here again, fungibility comes into play.

    Take Soy Beans for example. Totally fungible world wide and controlled by the crooks. Brazil has only got 30% of the market which is bought by both China and the rest of the world. US has about 35% give or take. Global demand is global demand, damn the price and all the Soya is bought every year. It is going to go somewhere as the demand will not change globally. The only thing that will change is the cut the crooks get by diverting shipments to the highest priced markets.

    This goes the same for the rest of the “Tarriffed goods”. The world need out food more than we need their TV’s, iPhones and all the rest of the crap they send us. Way overblown and with POTUS, is is the start of a negotiation. Look for more Tariff threats from POTUS, watch all the crooks scream while DJT stick it to them and break out the popcorn. It is time that the USA stops the bend over and take it in the rear and starts getting a fair deal.

    Just my 2 cents.

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