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Market Strategy 8/26/2019

  • John Stoltzfus
  • August 26, 2019

“Why Can’t We Be Friends?”

The words of 1970s band War come to mind as tweets overshadow news from Jackson Hole and the G7 meeting

Key Takeaways

  • The week ahead will find investors looking for clues for the markets’ potential for resilience or weakness.
  • Last week reaffirmed the power of uncertainties surrounding the trade war to unsettle markets and take stocks lower even as economic data stateside continued to signal resilience.
  • A brace of economic data this week will provide investors opportunity to judge the strength of the economy with a second estimate of Q2 GDP, inflation indicators, and consumer sentiment.
  • With more than 96% of the S&P 500’s companies having reported, Q2 earnings are up 1.7% on the back of 3.6% revenue growth. Results thus far beat negative consensus expectations at the start of the earning season.

As markets in Asia opened lower today (Monday) and as European and US traders anticipated lower openings in their respective bourses, traders and longer term investors will likely ponder scenarios that might develop in the days and weeks ahead.

From our perch on the Market Strategy Radar Screen, we must express disappointment with the tone of the geopolitical rhetoric at the root of last Friday’s sell-off. That said, we’d have to say that such disruptive occurrences are part and parcel of a dispute (in this case a trade war) in which both sides have such different views about trade and what constitutes abusive behavior in that area compounded by political, economic and fundamental ideologies that are diametrically opposed.


For those with historical perspective on geopolitics and how nasty deliberations and rhetoric can get during periods of negotiations between leaders of countries with opposing ideologies, what came to pass on Friday was likely a setback in a process toward resolution that should have been expected. As such, the markets may have over-reacted on Friday and may have a few more days to act out fearful emotions before cooler heads in the market and perhaps the political realm prevail.

US Secretary of Commerce Wilbur Ross (a key member of the Trump administration in the area of trade) had warned months ago that the complexity of the issues in the trade negotiations between the US and China would likely require more time to arrive at a resolution than most might expect. In hindsight, his comments were perhaps understated and under-reported.

It’s easy to say “the darkest hour comes before the dawn,” but sometimes the darkness of night appears never-ending. For now, investors’ convictions and patience will likely be tried. We have found over the course of our tenure in the markets (over three and a half decades) that it helps to practice the discipline of diversification, have an awareness of one’s goals and objectives, and recognize that wherever risk is present, opportunity often lies close by.

Quotation from Aenean Pretium

The stakes are high not only for the US and China but also for all their trading partners—essentially the whole world. .

Give and Take

he current dispute between the US and China is not tied to armament reduction (though such talks might lie ahead on another platform). Rather, the dispute concerns trade and trade practices.
In our view, for the US position in its simplest form, the talks are about establishing a fairer regime in trade practices to reduce theft of intellectual property and innovation as well as protect against technological espionage and provide a more level competitive landscape. For China, we believe there’s a very natural reluctance to give up the very favorable handicap to compete that it was given by the US, Europe and non-communist Asia since China opened its doors to an economic solution to challenges it faced long before it was the second-largest economic power in the world.

The ubiquitous nature of technology and globalization has lowered barriers of entry to competition. Quite naturally, this necessitates readdressing the fairness of the playing field on which global trade takes place. The stakes are high not only for the US and China but also for all their trading partners—essentially the whole world.

Our expectations remain that faced with the gross impracticality of extending the trade war and further ramping up hostilities, both sides will recognize the economic cost to humanity and seek more diligently to find resolution sooner than later. In the interim, the respective constituencies of both sides belonging to business interests and consumer citizenries are likely to exert as much pressure as they can summon to get things resolved.

John Stoltzfus of Oppenheimer Asset Managment Inc.

John Stoltzfus


Chief Investment Strategist, Oppenheimer Asset Management Inc.

John is one of the most popular faces around Oppenheimer: our clients have come to rely on his market recaps for timely analysis and a confident viewpoint on the road forward. He frequently lends his expertise to CNBC, Bloomberg, Fox Business, and other notable networks.

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