On this morning’s Trey Ware Show, Karl discussed the ongoing trade war and how it’s heating up once again. Combine this with Middle East tensions and stocks are under pressure.
Trey: Karl Eggerss is here to talk about what we see happening with the futures, based on what the president said over the weekend, vowing to increase us tariffs, $200 billion of Chinese imports by Friday because negotiations have been moving too slowly. And this week is when they are getting together. A team of trade negotiators have arrived in Washington and they’ll start today and sit down across the table from each other and see what they can hammer out on the trade negotiations. So Karl, what can you tell us about all this? And the Dow futures this morning I understand have been down anywhere between 400 and 500 points?
Karl Eggerss: Yeah. News happens fast, as you know. Not only do we have this that kind of came out of the blue and it kind of feels to me as if President Trump’s getting antsy to say, “Look, let’s get this done. Let’s quit talking about it.” And it’s one last push to say if we don’t get this done by this date, we’re going back to where we were literally 18 months ago.
Karl Eggerss: And then you pile on top of that, just like you said, us sending an aircraft carrier to the Middle East, sending a message to Iran. That’s a double whammy for … you know, people are looking for reasons to take profits for the market. We talked about the last couple of weeks. The market has been grinding higher because of trade progression and because the economy was doing great and all these reasons, but at the same time, we hadn’t had any type of correction since Christmas Eve.
Karl Eggerss: So, a pause wouldn’t be out of the noise out of the ordinary. I will say this, Trey. I was looking back, every time we’ve had the markets drop at the open like we’re going to see today because of trade. You’ve seen the market rally throughout the day. So that’s a good sign that hopefully this doesn’t stick and it’s just a temporary knee jerk reaction. Because remember, a lot of this trading that we see is done by algorithms and computers nowadays to where when a headline crosses, computers are programmed to sell immediately. And that’s what we see and that’s why we saw the markets just immediately drop 400 to 500 points. So, let’s see if it can claw its way back, but we are seeing a little bit of stabilization and, look-
Trey: How much is it up over the past couple of weeks though, Karl? So Karl,
Karl Eggerss: What? Say that again?
Trey: How much is it up over the past couple of weeks?
Karl Eggerss: It’s actually pretty flopped the last couple of weeks. You know, there’s this theory of sell in May and go away, which basically means you sell in the summertime because the markets don’t do much. Having said that, we’ve had very good Mays the last few years and so you don’t want to trade or position your portfolio based on the calendar. But it has been a pause here. We’ve definitely lost some of the momentum because look, we’re still up over 20 something-percent since Christmas Eve.
Karl Eggerss: And so for us to go back to the old highs, which is where we are right now and pause, perfectly normal. So again-
Trey: But I’m thinking that if we lose 500 points based on this announcement and we got the economic news on Friday, which was just stunningly good. Stunningly good, outstandingly good economic news on Friday, we’re in a better position I think economically and with the stock market to be able to fight these battles that have need to be fought for many, many years so that these other countries quit taking advantage of us.
Trey: I think we’re in a good position. If you’re going to fight, you fight from a good position, a position of strength. I think economically, unemployment wise and of course with the stock market, we’re in a sharp, good position to be able to fight these battles that need to be fun and have needed to be fought for decades.
Karl Eggerss: Well, some of the data coming out of China has been slightly better, so they may start to be feeling the same way we are with our economy stabilizing. Having said that, it’s interesting that President Trump noted, hey, we have tariffs in place, and part of that is the reason why our economy’s been doing so well the last few months. And so he firmly believes that this is the solution. I still think, hopefully this is a negotiating tactic.
Trey: Yeah, I do too.
Karl Eggerss: I do not like tariffs. I don’t think anybody does, and it’s clear Wall Street does not like it.
Trey: Yeah, no doubt. Karl Eggerss, EggerssCapital.com. Check him out.