Treasury Secretary Scott Bessent told reporters that Trump was pausing his so-called ‘reciprocal’ tariffs on most of the country’s biggest trading partners, but maintaining his 10% tariff on nearly all global imports. Import tariffs on goods from China, though, would surge to 125% “effective immediately,” Trump said on social media.

It was seemingly an attempt to narrow what had been an unprecedented trade war between the U.S. and most of the world to one between the U.S. and China.

Global markets surged on the development.

California Democratic Sen. Adam Schiff, a frequent critic of Trump, took to social media to question the administration’s intentions.

“Trump is creating giant market fluctuations with his on-again, off-again tariffs. These constant gyrations in policy provide dangerous opportunities for insider trading,” he wrote. “Who in the administration knew about Trump’s latest tariff flip flop ahead of time? Did anyone buy or sell stocks, and profit at the public’s expense?”

Schiff added “I’m writing to the White House — the public has a right to know.”

Before the pause was announced, Gov. Gavin Newsom put out a call directly to international leaders, urging them to continue thinking of California as a “stable trading partner” regardless of what happens in Washington.

The governor had previously directed the state to pursue international trade relationships outside of the federal government and called on foreign governments to exempt California-made products from retaliatory tariffs the rest of the country may face as a result of Trump’s tariffs.

“Donald Trump’s tariffs do not represent all Americans, particularly those that I represent here in the fifth-largest economy in the world, the state of California,” the governor said in a video posted to social media.

The Trump administration’s about-face on tariffs came after a strong reaction across the global economy.

The tariffs kicked in shortly after midnight, including 104% on products from China, 20% on the European Union, 24% on Japan and 25% on South Korea.

When a downturn appears on the horizon, investors typically crowd into U.S. Treasury notes as a safe haven, viewing the federal government as a source of stability. Not this time. Government bond prices are down, pushing up the interest rate on the 10-year U.S. Treasury note to 4.45% in a sign that the world is increasingly leery of Trump’s moves.

“The market is highly nervous about foreign investors stepping away from the US Treasury debt, which is sending yields sharply higher,” said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities said earlier Wednesday. “Markets more broadly, not just the Treasury market, are looking for signs that a trade de-escalation is coming. Absent any de-escalation, it’s going to be difficult for markets to stabilize.”

The Republican president was publicly defiant as the stock market recovered slightly, then sold off and then bounce back in morning trading. The S&P 500 stock index has fallen more than 18% since Feb. 18 as Trump’s tariff plans crystallized.

Business leaders warned of a likely recession.

JPMorgan Chase CEO and Chairman Jamie Dimon said there would “probably” be a recession, although he also deferred to his economists.“I do think fixing these tariff issues and trade issues would be a good thing to do,” he said in an interview with Fox Business Network’s “Mornings with Maria.”

On CNBC, Delta Air Lines CEO Ed Bastian said the administration was being less strategic than it was during Trump’s first term. His company had in January projected it would have its best financial year in history, only to scrap its expectations for 2025 due to the economic uncertainty.

“Trying to do it all at the same time has created chaos in terms of being able to make plans,” he said, noting that demand for air travel has weakened.

Treasury Secretary Scott Bessent has previously said it could take months to strike deals with countries on tariff rates, and the administration had not been clear on whether the baseline 10% tariffs imposed on most countries would stay in place. But in an appearance on “Mornings with Maria,” Bessent said the economy would “be back to firing on all cylinders” at a point in the “not too distant future.”

He said there has been an “overwhelming” response by “the countries who want to come and sit at the table rather than escalate.” Bessent mentioned Japan, South Korea, and India. “I will note that they are all around China. We have Vietnam coming today,” he said.

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Indeed, by the time some of you read this, we will be free. If all goes according to the White House’s plan, April 2 will go down in history as America’s “Liberation Day.”

Steve Bannon, a prominent unofficial Trump advisor, is so confident about its success, he’s already talking about making Liberation Day a federal holiday next year.

But we’re getting ahead of ourselves. From what will we be liberated on Liberation Day?

The Trump administration has been oddly parsimonious about providing one of its patented pithy catchphrases for what we’re being liberated from. You’d think they’d come up with something like “Globalist Tyranny,” “Neoliberal Serfdom,” “Surplus Production Sucker Status.”

But we can infer what they have in mind from context. On March 21, President Trump posted on social media, “April 2nd is Liberation Day in America!!! For DECADES we have been ripped off and abused by every nation in the World, both friend and foe. Now it is finally time for the Good Ol’ USA to get some of that MONEY, and RESPECT, BACK. GOD BLESS AMERICA!!!”

To this end, Trump intends to impose sweeping tariffs on foreign cars and reciprocal tariffs on every single American trading partner.

The exact numbers and other details are murky. “No one knows what the f— is going on,” Politico quoted a White House ally close to Trump’s inner circle as saying over the weekend. “What are they going to tariff? Who are they gonna tariff and at what rates? Like, the very basic questions haven’t been answered yet.”

White House trade advisor Peter Navarro expects these tariffs to raise $600 billion annually. Nearly every serious economist across the ideological spectrum understands that American consumers would pay the bulk of that. Thus, if “successful,” Trump would be imposing the largest, most regressive tax increase in history.

It would be regressive because the taxes would hit the poor and middle class much harder than the wealthy, because a larger share of their income goes toward basics like gas, food and clothes.

The challenge of writing about “Liberation Day” is that it is so incandescently stupid it amounts to a conceptual piñata: You can whack at it from any angle and get some reward for your effort.

For starters, many people understand that tariffs on, say, foreign steel make foreign steel more expensive. As a result, the things we make from foreign steel become more expensive, too. What gets overlooked, however, is that taxing foreign steel also makes domestic steel more expensive. When you make something more scarce — steel, eggs, Taylor Swift tickets — prices go up.

Politically, the idea of deliberately making things — like literally all the things — more expensive, when you were elected in large part due to popular exhaustion with inflation, is so irrational it’s like the economic policy equivalent of a Dali painting.

Geopolitically, blowing up our alliances and the global economy in the name of “self-sufficiency” is unfathomably idiotic. The more a country relies on tariffs to “protect” its economy, the poorer it is. The more friendly trading partners a country has, the stronger it is.

The wellspring of this geyser of asininity is the simple fact that Trump doesn’t understand how trade works.

The British economist Charles Goodhart coined “Goodhart’s Law”: “When a measure becomes a target, it ceases to be a good measure.” For Trump, the measure in question is balance of trade. He thinks trade deficits are proof that America is being “ripped off.” That’s not how trade works.

Every time you get a haircut, you have a trade deficit with the barber. Are you being ripped off?

Trump’s obsession with Canada illustrates his confusion. We have a trade deficit with Canada, under a trade agreement he crafted in his first term. Hence, Trump claims we “subsidize” Canada $200 billion a year (a made-up number, but that’s beside the point). The only reason we have a trade deficit with Canada is that they sell us oil at a price below global market rates. If we stopped buying their cheaper oil, we’d be worse off. Gas prices would go up and American jobs dedicated to refining that oil and exporting it would vanish. But the metric Trump cares about would improve.

Hold on here. Stuff we need would have become more scarce and expensive. Americans would be worse off. And that’s a win because … why?

During the years of our supposed economic captivity, the American economy became the “envy of the world.” That’s what Trump seems bent on liberating us from.

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The majority of the lumber that the store sells comes from Canada and nearly all of its steel products are made in China, general manager Rieff Anawalt said. Those countries, along with Mexico, have been targeted in sweeping tariffs imposed by President Trump during his second term, sparking a global trade war that intensified this week.

“These tariffs are 100% going to impact us,” Anawalt said. Wholesale reps for the family-run hardware company, which has five locations around Los Angeles County, have warned him to expect prices to go up by April 1 — costs that he said he’ll have to pass on to customers.

“We’re going to see major increases: 15% to 25% across the board in this industry,” he said. “It’ll make COVID prices seem cheap.”

Across California, businesses of all kinds — farmers, automakers, home builders, tech companies and apparel retailers — are reeling from weeks of on-again, off-again tariff chaos as Trump has announced a slew of levies against the country’s top three trading partners, implementing some while modifying, delaying or reversing others.

“It’s a day-by-day soap opera, and just like a soap opera, you get relief, then it heats up again,” said Jonathan D. Aronson, a professor of international communication and international relations at USC.

As a result, business owners “don’t know what’s going to happen,” he said. “They can’t plan. They don’t know how much to produce. They don’t know who their business partners are going to be.”

This month has been particularly tumultuous. On March 4, Trump’s 25% tariffs on imports from Canada and Mexico kicked in, with a limit of 10% on Canadian energy; he also doubled the tariff on all Chinese imports to 20%. All three countries vowed to strike back with their own measures.

The next day, Trump granted a one-month exemption for U.S. automakers on his new tariffs on imports from Canada and Mexico. The day after that, he said he was postponing many of the tariffs on Canadian and Mexican imports for a month.

On Monday, in a blow to farmers in California and across the U.S., China imposed retaliatory duties of up to 15% on American agricultural products including chicken, corn, beef, pork, wheat and soybeans. Then on Wednesday, Trump’s 25% tariffs on all steel and aluminum imports went into effect.

To counterbalance the effects of the tariffs on their bottom lines, businesses may have to overhaul their operations, said Jerry Nickelsburg, faculty director of the UCLA Anderson Forecast.

“The way in which firms react to that uncertainty is to not put all their eggs in one basket,” he said. “So they cut back on how much they would order, which means they’re going to produce less and they need fewer people — or if not fewer people, fewer hours for the people they have.”

The latest volley came Thursday morning, when Trump threatened to place a 200% tariff on wine and liquor from the European Union in response to the EU proposing a 50% tariff on American whiskey. About an hour later, he wrote in a follow-up post on Truth Social that the U.S. “doesn’t have Free Trade. We have ‘Stupid Trade.’”

“The Entire World is RIPPING US OFF!!!” he said.

Bolstering the economy was one of Trump’s core promises during the election, and tariffs are key to his strategy. He threatened to slap tariffs on Mexico, Canada and China on his first day back in office, explaining the decision as a way to crack down on illegal immigration and drugs.

But the escalating trade tensions have pummeled Wall Street for three weeks. On Thursday, the S&P 500 closed in correction territory, ending the day down 1.39%; the index is now 10.1% below its record close Feb. 19. The Dow Jones Industrial Average fell 537.36 points, or 1.3%, closing at 40,813.57.

The fallout for farmers

The prolonged back-and-forth has also unsettled companies, both those that import goods from abroad and those that sell their products to foreign clients. California’s economy could be especially hard hit because of its heavy reliance on trade with China and Mexico, and because of its position as a global agricultural powerhouse.

California farmers grow the largest share of the nation’s food — more than a third of the country’s vegetables and more than three-quarters of its fruits and nuts are grown here — and the state’s fertile ground is a major supplier of produce to countries around the world. Farmers also rely heavily on fertilizer from Canada, which could cost more as the tariffs take hold.

“Farmers in California are going to be hurt particularly badly because almonds, soybeans and things like that are huge exports of the United States,” Aronson said.

The state also accounts for about 85% of wines produced in the United States and is home to thousands of grape growers and wineries, many of them small and generations-old. The Wine Institute says the industry supports employment for more than 420,000 Californians and generates $73 billion in economic activity in the state. Canada is the largest market for California wine.

A flurry of activity at the ports

Some L.A.-area companies have been stockpiling inventory to get ahead of expected price hikes tied to the tariffs, said Stephen Cheung, chief executive of the Los Angeles County Economic Development Corp.

“A lot of them were hit pretty hard during the last trade war with China,” he said, “so they knew better than to wait and hope for the best.”

That has been reflected in shipping data from the ports in Long Beach and Los Angeles, which continue to record huge numbers thanks to several months of front-loading cargo ahead of Trump’s inauguration.

The Port of Long Beach moved 765,385 twenty-foot equivalent units, or TEUs, in February, a 13.4% increase from the previous year. January’s year-over-year growth was even larger: 952,733 TEUs — a unit of measurement based on the volume of a standard shipping container — were moved, representing a 41.4% increase.

After Trump launched a trade war with China during his first term, the Port of Long Beach lost about 20% of expected Chinese cargo in 2019, Chief Executive Mario Cordero said. That was supplemented by a 10% increase of imports from countries in Southeast Asia including Vietnam, Indonesia and Thailand. He expects the same thing to happen this time around.

In the coming months, Cordero said the local economy could see supply-chain disruptions, similar to what occurred during the pandemic, “if we continue on the path of aggressive and high-percentile tariffs.”

The Port of Los Angeles expects a 10% reduction in volume from last year amid Trump’s tariffs against China, Executive Director Gene Seroka said.

One of the largest seaports in the country, the L.A. port has seen sharp increases in cargo since last summer as businesses stocked up in anticipation of potential Trump tariffs. Just under 10.3 million TEUs, a near record, passed through the port last year.

Those numbers are likely to trend downward as tariffs take hold and the economy adjusts, Seroka said. “Fewer containers mean fewer jobs.”

Economists say it’s difficult for companies to quickly change suppliers, and some may be loath to upend their supply chains given the ever-changing nature of Trump’s trade policies.

Some are trying anyway.

Francesca Grace, an interior designer and home stager in Los Angeles, said tariffs have already affected the availability and price of items including fabrics, wood and other building materials, and smaller decor pieces.

Supply chain delays have extended her project timelines in some cases to three to six weeks from immediate availability, and she’s contending with “at least a 25% rise” in costs for materials from China. As a result, she’s now trying to source all of her products locally, up from 75%.

“While this shift aligns with our values, it will also cause our pricing to increase,” Grace said. “We are doing everything we can to avoid increasing our pricing too much. The last thing we want is for these changes to negatively impact our business or make our designs inaccessible.”

Other businesses say they have little choice when it comes to where they get their merchandise.

“Lumber prices are what they are. There’s no sourcing it somewhere else, so we’re going to have to deal with it as it comes,” said Anawalt, the general manager at the Malibu hardware store. “It’s so beyond my control, there’s nothing I can do. I was panicked at first, but now I’m just going to wait.”

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Winter is here early this year. Usually here, in Southern California, we do not see snow or rain until middle to late January. The forecast is for more of the same. It appears this is a similar story in major areas of the U.S. Will this year bring us a white Christmas?

Starting this week, the Institute of Supply Management (ISM) Manufacturing Index released their November reading. This is a good leading economic indicator (LEI) of the economy and helps gauge changes in the business cycle. Changes in this index are highly correlated to changes to the gross domestic product (GDP).  It is the difference between new orders and inventories which is a good measure for future production. The market was expecting an increase over October’s reading of 48.3. Anything below 50 is believed to indicate the US economy is in a contraction and if over 50 reflects the economy is in expansion. For the fourth month in a row the number came in below 50 and surprising Wall Street came in below October’s reading at 48.1. This is near the low of 47.8 in September.

New Orders Index read 47.2 in November, a decrease of 1.9 when compared to 49.1 in October.  This reflects a higher rate of contraction for the fourth straight month. There are six top industry sectors and of those, five contracted and only one expanded from the October performance. Other Manufacturing Indices (OMI) reporting a slowing trend include Employment, Inventories, Customer’s Inventories, Backlog of Orders and New Export Orders. Rising Manufacturing Indices include Production, Supplier Deliveries, Prices, and Imports. There are no indices expanding at this time.

Economic forecasts for 4^th quarter performance surged in November to 1.7%. After this report, forecasts dropped to 1.3%. Economists are debating if this is the bottom and if in future months this will be reversed both in the U.S. and globally.

With the Federal Reserve lowering rates mid-cycle labeled as an adjustment, the economy is expected to turn upward in coming months. It is also argued that the Fed did too little too late. Others argue that the trade tariffs have impacted the economy and the economy can’t move forward until this dispute is resolved. Reviewing the corporate earnings, most companies have lowered expectations and have seen results come in above them. This is a case of, “not as bad as expected.”

There is more data to come and most expectations are that 2019 will end strong. December is historically known for its strong performance. We will have to wait and see how this quarter plays out and what the reports show us through this month and in January for the 4^th quarter. This is a different winter.  Stay prepared and on your toes.

If you have questions on a particular company or investment and would like our feedback, contact us at my email below. Our team will research and respond to you with our recommendation and opinion.

Andrew F. Kotyuk, CIMA* is CEO and Principal of Alpha Wealth Management LLC. For questions or investment topics please email me afkotyuk@alpha-wealth.com.

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Markets are hitting fresh new highs. Optimism is in the air. A surge in the markets of ten percent (10%) once the Phase One tariff agreement is reached is expected. A rally of historical proportions is occurring. Outflows out of bond funds and into equity markets is happening at breakneck speed.

Bears are definitely being beaten down as fear of a recession ebbs and markets head into the historically best half of the year. Heading into the holidays, back to school and holiday sales start to kick in. Paired with folks going back to work, the focus of the economy shifts to, well, work. Indicators point to a strong finish through the holidays.

Supporting this upside are several positive headlines: the recent Federal Reserve report, by Chairman Powell, indicates a pause in lower rates for the near future. The Fed’s apparent comfort with the changes they made and current data makes the case for a wait and see attitude. Reasoning for the seventy-five (75) basis point decrease has been coined as a “mid-cycle adjustment,” not as a need to stave off a recession. Wall Street has responded favorably to this by brushing off any economic concerns and embracing a continuance of a bull market. Supporting this is the closing out of the third (3^rd) quarter earnings allowing the market to breath until January.

A nice upside surprise recently has been the slight lifting of the global economy. Recent negative rates seen overseas has shifted upward in light of the positive data. American treasuries have responded to the global market and U.S. rally by reversing course. Global markets have been dragging down our economy for the last several years. If there is a sustainable shift into a global expansion, the U.S. economy would be a recipient and could drive several more legs of a bull market.

When this is paired with a possible trade deal before the end of the year, you have the high probability of a rally through New Year’s. Driving this is the “Fear of Missing Out.” This is when small investors jump into the market because it has been doing well, despite the market being valued fairly and maybe even being adjudged at a rich premium.  This is not the time to buy more of what has been doing well. This is the time you ring the register and take profits. Fear by many money managers is that the high stock prices do not have any justification. In fact, the opposite is the case, with lowered expectations for many companies. With the bond market prices going down due to the fear of trade shifting to FOMO in equities, we are seeing yields rise. This is a great time to add to your fixed income positions, a great place to put profits.

Don’t let FOMO force you to buy stocks. Use FOMO to take profits.

If you have questions on a particular company or investment and would like our feedback, contact us at my email below. Our team will research and respond to you with our recommendation and opinion.

Andrew F. Kotyuk, CIMA* is CEO and Principal of Alpha Wealth Management LLC

For questions or investment topics please email me afkotyuk@alpha-wealth.com.

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Search: Fear of missing out

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September started with new tariffs going live.  What has followed and will follow for the month of September is a rally. 

September is predicated on a breather from possible known negatives.  This has left room for positive news to gain traction fueling the rally.  This has set the stage.   

Following the tariff increases, China abruptly said it would not retaliate. 

We then heard from the White House that telephone conversations had occurred and coined as, that they went well. 

It was a short time after this that an announcement of an October meeting between both nations would occur. 

No more news for September is expected on this front, except positive news.  

Next was the Federal Chairman’s Powell position.  First, he was recorded with a firm approach of not raising rates. 

Then he moved one leg and went to neutral, followed by a quarter-point drop in interest rates in July.  Some comments that followed in August left the markets questioning a rate cut in September. A drop in the jobs report, to 130,000 instead of a 150,000, showed truthfully the U.S. economy is slowing for the third straight month.  Powell, on September 6th in Zurich, stated the Federal Reserve remained committed to sustaining the economic expansion. He left investors expecting a conservative rate cut of a quarter percent during the next meeting September 17-18th.

These issues are unresolved, but in a seemingly sidelined state for now. In addition to similar results for BREXIT and Hong Kong’s revolt, it leaves September staged ready to be flat.  A flat market is one that is range bound and bounces between the highs and lows. 

Never really crossing either floor or ceiling.  If you are a passive investor, you will just ignore this period and do nothing most likely. 

If you are an active investor, then a trading strategy should be deployed.  

From my view September will rally to recent highs again, fueled by the Federal Reserve providing a rate drop.  These highs are truly unjustified, in my opinion, when corporations are having to reduce their expectations. I also believe chances are minimal for a deal to happen in October.  Some argue the President needs a deal going into the election. 

Others argue he has to make one this year because he grades himself by the performance of the market.  In my view, though, polling shows the vast majority of Americans believe China has taken advantage of Americans and agree with the President in holding the line against them.  This holds true for bipartisan politicians too. If President Trump understands the people are with him in regards to this issue, why would he resolve it by settling? I don’t believe there will be a meaningful agreement in October.  If there is not one and the leading economic indicators continue to weaken, then be prepared for more volatility. I recommend taking some more profits while September is on stage and picking up some additional bonds before rates continue to be pushed down by the Feds.

If you have questions on a particular company or investment and would like our feedback, contact us at my email below.  Our team will research and respond to you with our recommendations and opinion. 

Andrew F. Kotyuk, CIMA* is CEO and Principal of Alpha Wealth Management LLC

For questions or investment topics, please email me afkotyuk@alpha-wealth.com.

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Around the world, there are several countries in very difficult unrest that could shift the course of freedom, economics, and power. History is constantly being written, some of the issues and results are minimal, and then there are the cataclysmic changes.   Several issues right now are seeing an acceleration in civil unrest and headed into a showdown. These events are presenting a higher level of risk to global markets and questions around what does this mean and where does this lead.

China and U.S. trade wars, I have highlighted several times. Tensions have risen, and new tariffs have gone into effect on September 1st. Polling around the nation has shown that there is broad support to reigning unfair trade with China and politically there is unity in the posture that for far too long the U.S. has allowed China to take advantage and it’s time to now take a stand. Challenges in China is how to save face if they make a deal as a communist country. Remember, the core of the trade war is around China stealing intellectual property from U.S. companies. As tariffs are increased, which country will blink first or will this come to a head?

During this year, another issue has come to the forefront in Beijing. Hong Kong’s leader passed an extradition bill that allowed extradition to mainland China for trial. Up until 1997, Hong Kong was a British colony. Following this, it held certain freedoms and autonomy as a territory despite being administered by China. The bill was widely viewed as Beijing chipping away at their freedom and deeper control within Hong Kong. The bill unleashed months of mass protests, closures of airports and violence. China has deployed troops as a measure against the hundreds of thousands and sometimes up to a million protestors. Their demands include withdrawing the bill, removal of the leader Carrie Lam, an investigation into the government and treatment of protestors. This week Carrie Lam blinked and withdrew the bill. Protestors are claiming it is too little too late. This adds to China’s brand worldwide and hurts their image while seeking support against the U.S. 

Across the pond, as we said in the Navy, the U.K. is headed into its own showdown. Boris Johnson, the new Prime Minister after Theresa May, stepped down after failing to find a solution regarding Brexit received the Queen’s approval to delay parliament until mid-October. This resulted in U.K. lawmakers voting this week to take control of the parliamentary business. Johnson is now fast-tracked on determining if there is a support to a Brexit no-deal in October 31st. Britain’s exit from the Euro has been at flux, and some fear that their exit from the European Union and the Euro currency could cause others to follow leading to the Euro being disbanded. What once brought Europe together could split it further apart. 

With this unrest outside of the U.S. and the global slowdown, the U.S. is viewed as a safe haven for fixed income and equity markets. The fact that you can rest your assets in the U.S. strengthens our economy and provide an argument that the next recession will be a very small one that is short-lived in our opinion.

If you have questions on a particular company or investment and would like our feedback, contact us at my email below. Our team will research and respond to you with our recommendations and opinion.   

Andrew F. Kotyuk, CIMA* is CEO and Principal of Alpha Wealth Management LLC

For questions or investment topics, please email me afkotyuk@alpha-wealth.com.

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Search: Where do you rest with global unrest

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Tariffs have been delayed to December with renewed hopes by President Trump that some agreement would be made with China. September 1st additional tariffs were to kick in. August presented additional slowing economic data globally that resulted in multiple governments seeing their bond rates drop. Data shows that it is the consumer, you and I, that are propping up the country with our spending. It seems to be in quite a substantial way to offsetting slowing manufacturing, housing and service sectors. By comparison, the United States is doing very well despite this compared to other countries. 

Now don’t get over-excited and jump back in the market with both feet. Just like when the market is panicking and I remind you to not do the same, it is my responsibility to do the same and give advice when there is mania to jump back in. Yes, the market is rallying and interest rates are back above their low. I suspect the market is going to shrug a slowing economy and interest rate inversion off. After all, a recession happens on the average about 22 months after an inversion. We have time, right?

When looking at the data there is still concern about slowing profits for companies and the continued lowering of projected earnings. This week started with racing back up toward the all-time highs. Why? Nothing has changed. If there was an agreement with China, then maybe. If there was an increase in corporate profits then, yes. Even if there were a bump in inflation, it would be a reason. Are there any positive headwinds?

It seems there is a positive discussion regarding the economy. Recently several companies who were labeled as companies that would be hurt by tariffs actually show in their latest corporate earnings that they haven’t been. Apple and Walmart both had good earnings and have rallied strongly lifting their indices. This week economists meet for the annual event in Jackson Hole, Wyoming. Right before this event, several of them upgraded their projected GDP to above 2%. They will release why soon. 

With the market giving us head fakes weekly, each direction looks like a trap. This is where discipline, a plan, and data comes in. Don’t get emotional or stressed out. I would like to see a 12-17% move off the highs before starting to add to positions. Right now, it appears there is double the risk to the downside than to the upside. Let the market gain a direction before evaluating your next steps. One measurable that I am watching is the Volatility Index, VIX. Normally when the market rally, it will drop. It should typically have a negative correlation to the market. In recent weeks, it hasn’t. When the market rally, it has not been falling and holding its ground. If this continues, there is more downside we believe soon. If it falls back off, then the market should move higher for the short term. Areas we are monitoring closely is oil and copper. These are both at twelve months, if not longer, lows. It appears oil is finally bottoming out poised to rally. 

As Kenny Rogers sings, “Know when to hold’em, known when to fold’em. Don’t gamble in the market.

Andrew F. Kotyuk, CIMA* is CEO and Principal of Alpha Wealth Management LLC

For questions or investment topics, please email me afkotyuk@alpha-wealth.com.

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Search: Know when to hold them

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The president has already imposed 25% tariffs on $250 billion in Chinese products, and Beijing has retaliated by taxing $110 billion in U.S. goods.

U.S. consumers will likely feel the pain if Trump proceeds with the new tariffs. Trump’s earlier tariffs had been designed to minimize the impact on ordinary Americans by focusing on industrial goods. But the new tariffs will hit a vast range of consumer products from cellphones to silk scarves.

The president’s announcement via Twitter came as a surprise, in part because the White House on Wednesday had said Beijing confirmed that it planned to increase its purchases of American farm products. That word came just as U.S. and Chinese negotiators were ending a 12th round of trade talks in Shanghai, which the White House called “constructive.”

Though the negotiations concluded without any sign of a deal, they are scheduled to resume next month in Washington.

The Dow Jones Industrial Average, which had been up nearly 300 points earlier in the day, was down nearly 200 points after Trump’s tweets announcing the new tariffs. The Dow closed for the day down 280 points — more than 1 percent.

Trump has long said he was preparing to tax the $300 billion in additional Chinese tariffs. But he had suspended the threat after meeting with President Xi Jinping in Osaka, Japan, in June.

It isn’t clear when American consumers are likely to feel the impact of the additional tariffs, but higher prices could show up in stores this fall.

“Attention all Target & Wal-Mart shoppers … the price on the goods you buy ahead of the holidays are going up due to trade policy,” tweeted Joseph Brusuelas, chief economist at the consultancy RSM.

Besides announcing the additional tariffs on Chinese imports, Trump tweeted that “we look forward to continuing our positive dialogue with China on a comprehensive Trade Deal, and feel that the future between our two countries will be a very bright one!”

The president accused Beijing of failing to follow through on stopping the sale of fentanyl to the United States or on purchasing large quantities of farm goods such as soybeans. Speaking to reporters Thursday at the White House, Trump complained that President Xi is “not moving fast enough.”

Trump said he scheduled the additional tariffs to begin Sept. 1 to give exports already en route from China time to get to the United States — a journey that can take three or four weeks. By setting the import taxes at 10%, he has leeway to ratchet them higher if necessary to further increase pressure on Beijing.

“Until such time as there’s a deal,” Trump said, “we’ll be taxing them.”

The world’s two biggest economies are locked in a trade war over U.S. allegations that Beijing uses predatory tactics — including stealing trade secrets and forcing foreign companies to hand over technology — in a drive to overtake American technological dominance.

Talks had broken down in May after the United States accused the Chinese of reneging on earlier commitments.

“The fact that this tweet comes after only one meeting with the Chinese delegation following the resumption of talks is extremely concerning,” said Rick Helfenbein, president of the American Apparel & Footwear Association.

Wendy Cutler, a former U.S. trade negotiator who is now vice president at the Asia Society Policy Institute, said: “These talks are not getting any easier. I don’t expect the Chinese to sit by … The combination of these latest tariffs, with Chinese counter-retaliation, is going to take a heavy toll on U.S. consumers, workers, farmers and businesses.”

Trump’s trade war and its consequences were a key factor in the Federal Reserve’s decision Wednesday to cut interest rates in an otherwise healthy U.S. economy. During a news conference, Chairman Jerome Powell pointed repeatedly to the uncertainty caused by Trump’s pursuit of trade wars on multiple fronts as a reason for the rate cut.

The president’s decision to impose a 10% tax on an additional $300 billion of Chinese imports might have been predicated, in fact, on his confidence that Powell’s Fed stands ready to cut rates again. The bond market signaled its belief in that theory Thursday, with Treasury yields dropping sharply after Trump’s announcement.

And according to the CME Group, market traders now foresee a roughly 70 percent likelihood of another rate cut when the Fed next meets in September. Before Trump’s announcement, the likelihood was pegged at under 50 percent.

Sarah Bloom Raskin, a former Fed board member, has warned that Fed rate cuts could embolden Trump to escalate trade battles for that very reason.

In the meantime, the additional Trump tariffs risk further souring the relationship between the world’s two largest economies.

“The stage is now set for a further escalation of trade tensions between China and the U.S.,” said Eswar Prasad, a Cornell University economist and former head of the China division at the International Monetary Fund. “It has become clear that there is no clear path to a resolution of the trade dispute in the coming months, and China might choose to live with a trade war while waiting out the Trump presidency.”

Trump has insisted that the tariff war is hurting China but not the United States. He tweeted two days ago: “Trumps got China back on its heels, and the United States is doing great.”

But his administration is providing $16 billion in aid to American farmers — on top of $11 billion last year — to offset sales lost after China imposed retaliatory tariffs on soybeans and other U.S. farm products.

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