Blog 23.09.2019

By September 23, 2019Food for thought

On Friday, Trump scuppered any hopes of an early end to the trade war. 

  • Trump continues to convince himself (but few other thinking people) that the U.S. is “winning” and China is paying the tariffs. 
  • Both are far from the truth but American voters think he is doing a good job in taking on China as they have been fed with lots of disinformation for decades. 
  • If it were not for cheap imports the cost of living would be higher, Oh and they would be playing baseball with obsolete expensive wooden clubs, mobile phones would be X times more expensive and ditto computers.
  • All that is unless the U.S. substantial increased imports from Indonesia, India, Malaysia, Vietnam, Bangladesh, Egypt, Mexico, Brazil, etc., which would have sky-rocketed making them targets for tariffs.

Now to my views on the week ahead:

The prospects are not good, that is unless there are some unexpectedly good flash PMI’s, but I will not be banking on that hopeful eventuality.

    • China – no change – Friday’s set-back of hopes for an early trade deal could cause China’s recent gains to reverse. Will China’s flash PMI’s continue to show a rebound irrespective of the negative media headlines of the last 3 weeks?
    • HK – no change – riots continue;
    • Taiwan – has clocked up 5 weeks on consecutive gains. On the other hand, Taiwan was further isolated last week when 2 Pacific countries adopted the “one China policy”. The only large power that supports Taiwan is the U.S. and that is only because of its military geographic significance and its purchases of armaments.
    • SET – last week was bad for the SET equity index. The THB continues to appreciate as fiscal reserves hit an all-time high. Sell and take profits as the BoT is unlikely to cut interest rates any time soon (it was unpopular with the elite when it did so a few months ago). Eventually it will cut rates to attract tourists or it will have a lot of empty hotel rooms.
    • EEC – I expect the EEC flash PMI’s to be lack lustre but not in recession.
      • Re- investments – the 3 equity funds which I referred to last week perked up but have a way to go before they better the STOXX50 equity index.
      • I look to make a small investment in an ETF which tracks the FTSEMIB index – look at ETFMIB (+20.55%), SXRY:GR (+23.54%) and IMIB:IM (+23.56%) – YTD stats. 
    •  U.S. – I expect the flash PMIs to confirm that manufacturing is still flat and that services hold the key to growth which remains similar to last month.
      • Re – investments – the FLEUSTI and MERTEPI – these 2 high tech equity funds fell further behind the DJUSTIC. The 2 fund managers, JPM and BlackRock should be doing something to correct what can only be described as “poor management“.
      • WFUSLCA – the large cap growth fund tracked the DJUSGL index but 3% lower throughout the week.
      • My favourite investment is an ETF which tracks the UTIL sub-index. I listed a few in last week’s report – IUUS:LN (+22.89%), IDU:US (+20.51%), XLU:US (+20.69%) and XLUS:LN (+23.08%) – YTD stats.
    • Bond funds – some perked up last week – hold.
    • Currencies – the mighty US$ gained against most currencies last week as the Fed’s decisions were seen as hawkish (but the banking sub-index crashed 5.3%). 
      • I cannot see the euro gaining as there is no good news, particularly for Germany which has ruled out fiscal spending to stimulate the economy.
      • Sterling – depends upon Brexit news. The law lords rule on prorogation in what is being described as a landmark decision.
      • Yuan – with Friday’s comments from Trump, I will not be surprised if there is concerted selling of the yuan. 
    • Property in the UK is becoming attractively priced as increases have declined below the rate of inflation and increases in wages. Once Brexit is out of the way, I expect prices to resume rising as the housing shortage persists unabated.

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