5/10/2019 Weekly Update: Return of the Trade Wars

Weekly Recap                                                                        

S&P 500                -2.01%

10 Year Treasury   +0.6%

Gold                      +0.64%

Volatility              +24.87%

Weekly Update: Return of the Trade Wars

Just about the time that the market appeared ready to breakout and start making some new highs, a Sunday morning tweet from Trump about new tariffs on Chinese goods sent the market into a mini-panic this week.  At the lows this morning, the S&P 500 index was down nearly 4% vs last Friday’s closing levels.  But, at around 10am the market staged a comeback and closed down only 2.3% for the week. 

Considering that most people in the market had considered the likelihood of a deal a foregone conclusion, down less than 2.5% can be seen as a relatively tame response—and tame, in the stock market, can either be interpreted as complacency, hubris or, just maybe, a strong market.  I, for one, am somewhat encouraged by the turnaround today and am hopeful that it may portend good things for the near term. 

But, while causality is nearly impossible to determine in the stock market, it would be nice to get a pulse on what caused the turnaround as that would make me more confident in my market prognosis.  If the market is merely expressing hope that a deal can still get done, that is less encouraging than if it is expressing confidence in the US economy weathering the storm of tariffs.  The latter would be an expression of strength, while the former would be more an expression of complacency.  Instead we are just left to guess as to the true cause of the turnaround today. 

One thing that definitely did not help the market today was the debut of Uber stock.  Already priced at the low end of the IPO range, Uber shot out of the gate like a Roman candle that had been drenched in water—that is to say the market was very unimpressed.   Uber has to be one of the most anticipated IPOs in the last 5 years and its performance today could have given us a glimpse into the market’s appetite for risk in an elevated valuation environment.  Instead, it closed below its IPO price of $45, dragging fellow ride-share newbie Lyft down with it.  Lyft, which IPO’d a few weeks earlier is now down nearly 32% from its IPO price.  Should this trend continue, one would have to speculate that there could be some major ripples felt soon in the private equity space—which has been one of the hottest arenas in the last 7-8 years. 

So, the market has plenty to digest this weekend.  David and I would like to say Happy Mother’s Day to the special mothers in our lives.  May you all have a wonderful weekend as well. 

Thanks for reading,

Zach and Dave

Calibrate Wealth
515-371-5316  

https://www.calibratewm.com/blog-01

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