The stock market is currently counting on about 55 more miles of border-wall funding, to put it crudely.
Thatâs the rumored deal on the table right now to avert a shutdown, and one reason for the renewed buying attitude on Wall Street. But given the Oval Office has to stamp its approval on any deal, watch this space and maybe @realDonaldTrump, who had a few things to say in El, Paso, TX last night.
Opinion: Why another government shutdown may have little effect on stocks
Politics is one of many market balls that investors are juggling these days. Our call of the day from Hayman Capital Management founder Kyle Bass, offers a refreshing top-down view on a lot thatâs ailing markets currently â but investors should steel themselves for what may be a less-than-bullish outlook from one investing honcho.
âMarkets will rejoice to the extent we get to a win on a trade deal. Itâll be short lived. My guess is by the end of the year the U.S. market will be lower than it is today,â Bass told Bloomberg in an interview that aired Monday. Bass earned his street cred back in 2007 making winning bets on subprime loans and the collapse of the U.S. housing market, so investors ought to take heed.
In the interview, Bass doubled down on a prediction that he made last year that the U.S. will face recession by 2020, citing headwinds such as global growth. He explains Chinese data, such as industrial production is looking shaky, while Italy entered recession last week and he gives Germany three to six months before its own downturn.
Global growth, in economic surprise terms … US on top, Europe on bottom@Gavekal pic.twitter.com/7EPzRUMEL5
— Liz Ann Sonders (@LizAnnSonders) February 12, 2019
Then there are the homegrown problems. âThe U.S. has this positive stimulus coming from the tax cut that we believe had a $250 billion impact last year, and itâll have a $400 billion positive impact in total this year, but next year it will only be $150 billion,â Bass says, adding that the deltas, or differences, here are important.
âThe deltas from this year to next is minus $250 [billion] so I think economic activity will begin to wane in the back half of 2019, and by the middle of 2020 weâll most likely be in recession,â he says.
And Democrats are probably not going to âlet Trump stimulate into an election year. Theyâre saying behind the scenes that heâs taken the economy hostage and theyâre going to let him shoot it,â he said.
A big problem is that the Fed, whose policy Bass grades an âFâ right now, canât help. âThe U.S. stimulated at full employment with our tax cuts. That stimulus is about to wear off. What I worry about is the last three recessions weâve had in the U.S., weâve cut rates 500 basis points. Now, we can only cut them 225 or 250,â he said.
In other words, as he says, âwe donât have the arrows and the quiverâ when it comes to Fed ammunition.
Separately, Bass and Daniel Babich, senior managing director at Hayman, wrote an op-ed for Bloomberg in which they implore the U.S. administration not to settle short over China and push for a bigger overhaul over âbulk economic espionage and theft.â
âGiven Decemberâs market decline in the equity markets, I think you see President Trump now potentially telling his team to just get a deal done and I think that would be a big mistake,â given the work his team has done, says Bass, adding that a deal on trade is just 10% to 20% of the whole argument that includes intellectual property theft, industrial policy, etc.
How to invest against a backdrop of a recession, tangled Congress and hapless Fed? Our chart of the day says no one is easily convinced these days. Read on.
Plus: One reason why the stock marketâs wild fluctuations donât faze most Americans
Â , S&P 500
Â and NasdaqÂ
all opened with strong gains as shutdown fears abate. On Monday, the DowÂ slipped, but the S&P and Nasdaq inched up. Read more in Market Snapshot.
Â is rising as the dollar
is en route to breaking an 8-day win streak. Oil
is surging after an OPEC report revealed a big output drop.
Read: Why the dollar is back on the rise despite the Fedâs dovish turn
Â are up and the Nikkei
Â led Asia mostly higher.
âMy Big Fat Buyersâ Strike.â Thatâs the headline on the Bank of Merrill Lynchâs February Fund Manager Survey out Tuesday. While global stock prices are up 7% since January, and commodities 5%, global equity allocations in February hit the lowest levels since September 2016. And the number of managers overweight cash â also a bearish sign â is the highest since January 2009.
The bank lays out the slump in equity exposure in this chart of the day:
Here’s one more that shows how a growing number those striking buyers believe the S&P 500 peaked last year:
Fed Chairman Jerome Powell will speak on rural economic policy in Mississippi at 12:45 p.m. Eastern, and weâll also hear from Cleveland and Kansas City Fed Presidents Loretta Mester and Esther George. As for data, a small business sentiment index revealed the worst reading since the 2016 presidential election. Job openings and household credit data are still ahead.
With results late Monday, Aurora Cannabis
offers a look at the first quarter of Canadaâs legal recreational-pot sales. Revenue quadrupled for the company, but it also revealed large losses and a shrinking margin.
Â and Groupon
Â are reporting results. TripAdvisor
Â and Activision
Â are due after the close.
Â buys Eero, next it wants to control your entire house, says MarketWatchâs Therese Poletti.
The newly appointed head of content for WarnerMediaâs future streaming service, hints that âFriendsâ and other past studio hits will live exclusively on AT&Tâs
Â WarnerMediXX and not places like Netflix
Thereâs no big fresh news on the trade front, aside from some upbeat comments out of Beijing, but things are fracturing elsewhere after a South Korea lawmaker demanded Japanâs emperor apologize over the abuse of wartime âcomfort women.â
40% â Thatâs how many insect species are dying around the world, with a third endangered, says a new study from the journal Biological Conservation. With the total number of bugs falling 2.5% annually, the insect apocalypse could be a reality within a century, say stunned researchers.
Can Russia survive âofflineâ? Putin intends to find out
Movie royalties from âTrading Placesâ are up for auction.
Summer date set for third season of âHandmaidâs Taleâ
âLast Week Tonightâsâ John Oliver booâd over his 2020 presidential prediction.
Hereâs why many Americans stay poor
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