Stocks Ignore Trade War & Government Shutdown For Now

Stocks - Slight Rally Despite Trade Woes

The stock market is overbought. The logic to buying stocks took a hit on Thursday, but they still rallied modestly. S&P 500 was up 0.14%, the Nasdaq was up 0.68%, and the Russell 2000 was up 0.7%.

VIX’s 3.23% decline helped push the CNN fear and greed index to 58 which is greed. It was at 2 last month. Stocks were oversold dramatically then, and stocks are overbought now.

Stocks - Trade War Is Heating Up Again

The logic to buying stocks took a hit because Commerce Secretary Wilbur Ross stated America and China are miles and miles away from a trade agreement.

The stock market has rallied this year because stocks were oversold starting the year, because the Fed has gone dovish, and because a trade deal was looking more likely.

The third part of that is no longer true. These comments come after the White House canceled a meeting with China because of intellectual property differences. Likelihood of a trade deal by March has fallen.

I wouldn’t be surprised if the two nations kick the can down the road by extending the deadline to make a deal by a couple months.

If the deadline isn’t extended and the new 25% tariffs go into effect, it will be another hit to the American and Chinese economies. The Chinese economy certainly doesn’t need this as 2018 GDP growth was the lowest since 1990. It’s tougher to say how America is doing because of the government shutdown.

Stocks - 35 Day Shutdown

The government shutdown is now up to 35 days which is 14 days longer than the previous record long shutdown. Wilbur Ross also commented on the government shutdown. His dismissal of the impact of the shutdown on government workers and on the economy suggests the White House is fine with the shutdown lasting another few weeks.

In Ross’s interview he stated, "You're talking about 800,000 workers and while I feel sorry for the individuals that have hardship cases, 800,000 workers, if they never got their pay — which is not the case, they will eventually get it, but if they never got it, you're talking about a third of a percent on GDP so it's not like it's a gigantic number overall."

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