stock market yield trade wars

2 Reasons Why The Stock Market Is Falling- It Ain’t Trade War Fears

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2 Reasons Why The Stock Market Is Falling- It Ain’t Trade War Fears

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The markets sure moves fast these days, the S&P 500 was down by nearly 6 percent this week! $1.1 trillion in market cap wiped off the S&P 500 over the past two days, and  $1.5 trillion for the week! So you think the trade wars totals will amount to that much? Unless this is really about something else.

What was the worst performing sector of the week the Techs! The XLK was down 7.1 percent this week. But the worst performing group over the past two days? Financials! Down 6.27 percent. All the big name banks down between 6 and 9 percent over the past couple of days.

Trade wars financials technology

XLU Price data by YCharts

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Trade War –  No Way

I know Nike reported results today, and they were strong, but Nike revenue from greater China in the fiscal third-quarter was nearly 15 percent, but still, Nike was up today.

You know how much business Morgan Stanely did in Asia in 2017?  Not much! Total revenue for the company was $37.9 billion, and $4.4 billion was in ASIA, not just China, 11.6 percent of total revenue. So not sure that the banks are getting slammed on this the trade war concerns.

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2 Reasons Why

So there seem to be two things going on in the stock market today. One, risk is coming off the table in the big Techs that have had massive run-ups, and Facebook was the start of that. Amazon was down nearly 5 percent this week, Netflix 5.5 percent, and Microsoft 8 percent.

yields

Second, banks are falling because the market is telling us that the Fed is likely not to be as aggressive raising rates as the market had previously thought. The odds of 4 rate hikes this year diminished rapidly. Why? Because inflation is in check and pretty much a dead issue, look at wage growth, CPI, PPI and PCE data. Look at the yield curve. 10-year yields have fallen since Wednesday afternoon, and the dollar is weakening.

dollar

So we have an unwind of some crowded technology stocks, and a move out of financials.

 

Too Much Concentration In Two Sectors

So why is the market going down, well look! There are only three stocks in the top 15 companies in the S&P 500 that are not Tech or Financials. I know Amazon says consumer cyclical, but come on, it trades with the techs.  Remember at the beginning of the article I told you that the S&P 500 lost $1.5 trillion in market value this week. Well, $571 billion or 37 percent of that was in these 15 stocks.

(Data compiled using Ycharts)

More stock specific stuff over the weekend.

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Tags: #sp500 #tech #technology #financials #banks #dollar #yield

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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.