One More Box Checked?

On the Trey Ware Show this morning, Karl discussed the positive meeting between President Trump and President Xi of China discussing trade.  Also, this combined with the Federal Reserve’s dovish comments last week may lead to a higher market.

Transcription:

Trey Ware:                         President Trump tweeting this morning, “My meeting at Argentina with President Xi of China was an extraordinary one. Relations with China have taken a big leap forward. Very good things will happen. We are dealing from great strength, but China, likewise, has much to gain if and when the deal is completed. Level the field. Farmers will be a very big and fast beneficiary of our deal with China,” he says. “They intent to start purchasing agricultural product immediately. We make the finest and cleanest products in the world, and that is what China wants. Farmers, I love you. President Xi and I have a very strong and personal relationship. He and I are the only two people that can bring about massive and very positive change on trade and far beyond between our two great nations. A solution for North Korea’s a great thing for China and all as well.” So Karl Eggerss from eggersscapital.com is joining me. Karl, any idea on how the market is going to reach in about an hour once it opens up on this news?

Karl Eggerss:                      Well, it’s going to open up, there’s no question about it. We’ve had two big overhangs in 2018. One of them was, of course, interest rates and how high the federal reserve would raise interest rates-

Trey Ware:                         And we got good news about that last week, where Jerome Powell said we’re at neutral right now. So it doesn’t look like he’s coming with any more rate increases for a little while anyway.

Karl Eggerss:                      Well, he’ll do one in December. That’s already a done deal. He’ll do one in December, and then probably pause. It’s amazing because two months ago, he was like, “We’re going to continue to raise this.” And now he’s had all this pressure from the president, and he’s capitulated. So now he sounds like a totally different person saying, “Well, it’s data dependent, we’ll see how it goes, and we may be close to neutral.” So that was one big thing that got the market boosted last week, and it’s been an overhang for months.

Karl Eggerss:                      The next thing, of course, was trade. I don’t think it’s a huge shock that we got both of these guys coming out saying it was a great meeting, we’re going to concede on some things. But, remember, we still don’t have a trade deal, and I think it’s going to be months before we get one. All he did was, the president delayed some of these things for 90 days. So while it’s good news, and it’s progress, to me it’s not a big shock that they both came out and said, “Hey, it was a great meeting. The market’s going to get a boost from this.” But, the devil’s in the details, and there’s still a lot of work to be done, because there’s some serious issues with China, not just cars and agriculture. But, it’s a step in the right direction, it’s what the market wanted to hear, on top of Jay Powell’s comments last week. So those two things will give stocks a boost this morning.

Trey Ware:                         Well, and it looks like we’re going into the Christmas buying season in a very strong position as well, economically, with employment being the way it is and all of that. All of that has to be good news for the market.

Karl Eggerss:                      It is, and as we’ve been saying though, keep in mind, this is … I think one thing that we need to be concerned about is the economy can’t withstand 2.5% interest rates, and Wall Street’s begging for Jay Powell to stop raising rates. That’s not a good thing. I mean, this economy should be able to withstand 4% interest rates. So do we really want them to stop raising interest rates, because if we do, that signals that see trouble in the future. So again, I think we’re going through a deceleration, the economy’s starting to … It peaked a little bit, it’s started to kind of … it’s on cruise control, maybe slowing just a bit. But, again, I don’t see a recession. I think the bull market we’ve been in is not over. But, again, all these headlines have caused a lot more volatility lately, and we’re going to be a little more news-driven over the next few months. But, listen, we’re setting up nicely for a Santa Claus rally, as they call it. It may be a week later than it typically is, but we may be getting going here, and rally into the end of the year, because again, the two big overhangs, at least for now, are in the rear view mirror.

Trey Ware:                         Very good. Karl Eggerss, eggersscapital.com. Thank you, Karl.

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