By: Kent Engelke | Capitol Securities
Many times I have commented about the tectonic changes occurring geopolitically and macro economically. These changes are being brought about by the electorate that is rejecting the multipolarity and interdependency of the global economy that has created great wealth inequality.
I would now like to suggest a new theme… the end of the era of unaccountability of mega-sized technology firms. In my view, the normal standards were suspended for them. They were regarded as “cool,” “disrupters,” “fun,” “freewheeling” and society/government were hyper-tolerant of the companies’ business practices. If mere mortal firms acted in such a way, these firms would be sued into oblivion.
In my view, this “soft image” gave them a worldwide license to evade taxes, break laws, abuse customer trust and exploit workers.
It appears “their” world has instantly changed. The EU is considering a 3% tax on Internet revenues, a tax that has been discussed for at least two years in an attempt to generate more revenue for the grossly indebted Union. The uproar over Facebook with even the most progressive media outlets commenting that this is not the first occurrence and such is wrong. The sexual harassment stories of Uber are widely documented as is the exploitation of Apple’s Chinese workers.
As stated, the above is nothing new, but the response is new.The proverbial sand pile is perhaps toppling.
Some might suggest that I am on a social rant. I am not. The market imbalances are widely documented, imbalances the result of technology based momentum trading that has vastly favored the mega-sized technology firms whose sociopolitical environment may have changed tectonically.
Commenting about Friday’s activity, equities were again volatile falling to early February levels. The Dow ended down about 1.75%. The NASDAQ was off 2.4%. Some are blaming trade. Others politics. While others, potential inflation concerns and monetary policy. I think all three amplified by technology based trading. For the week, all major indices suffered their biggest losses since January 2016.
Bloomberg writes the NASDAQ 100 fell about 7.3% for the week, the Dow 5.3% and the S & P 500 was off 6.0%. The small caps as per Bloomberg only fell about 3.8%, the result of the reliance on domestic sales. I will also add from the lack of ownership,
Oil again rallied posting its largest weekly gain since July closing around 3-year highs. Some are beginning to suggest a geopolitical premium is now emerging. I share this view, however, the premium in view is small historically.
This week the economic calendar is comprised of a final revision of 1Q GDP, trade data, personal income and spending, home sales data and a sentiment survey. Will the data impact trading?
Last night the foreign markets were up. London was up 0.49%, Paris was up 0.43% and Frankfurt was up 0.67%. China was down 0.60%, Japan was up 0.72% and Hang Sang was up 0.79%.
The Dow should open considerably higher as fears of escalating trade tensions are beginning to ease. Weekend comments from the Administration were “cautiously hopeful” that China will reach a deal to avoid tariffs. A deal was struck with South Korea. The 10-year is off 7/32 to yield 2.85% ahead of major debt sales.