What happened last week.
What we're watching for next week.
The Stock Market
If you feel like your portfolio has just been punched in the face, don't worry. I scoured the market landscape and finally found a statistic that should make you feel better.
In spite of all the drama, the market is only down by 4.6% from its high-water mark. So, the punch in the face you just got was only a glancing blow, and it won't even leave a mark. It was more of a slap than a punch. Feel better? Me neither.
Chart 1. Market action last 90 days
See that sharp drop on the right side of the chart? Chartists call that a "Dipsy-Doodle." (I call it a face slap.) But all seriousness aside, it doesn't look that bad, right?
The Economy
We just got another sign of a slowing U.S. economy - this time from ISM, the Institute of Supply Management. Their manufacturing index appears to be in free fall.
Chart 2. Manufacturing takes another hit
Geopolitics
President Trump has escalated the trade war with China by threatening to ban, or at least limit, the listing and trading of Chinese companies on American stock exchanges. Whether or not this is a good idea depends on your point of view. If you're a free market capitalist like me, it's a bad idea. If you're a protectionist like Trump, it's a good idea.
Winners & Losers
Assessing the carnage from the last few days reveals some interesting information. Contrarians might look for bargains, and trend followers might look for opportunities in the sectors that have held up.
Chart 3. Who got hurt the most
Chart 4. Where are the safe havens
Charts 5 & 6. S&P 500 with Key Markers
The left chart shows the return for the S&P over 4 time frames. The right chart shows how far the market is from 4 key markers. I publish these charts often, and they're rapidly deteriorating.
Final Thoughts
I wouldn't call the recent market action a big deal. I would call it a "hissy-fit." But it didn't come from nowhere. There are some serious cracks in the foundation and we should all pay attention to what's going on.
In my opinion, this latest China gambit is wrong-headed. The impeachment thing is interesting but will probably not have much of an impact on the market or the economy.
With the economy, here and abroad, slowing down as the months go by, smart investors will take some risk off the table and lay low until things improve.
If you want more info about how to set up a solid Plan B, see my articles on the subject here and here and here.
For a full analysis of the probability of a bear market or a new recession, check out my Monthly Intelligence Report.
As always, if you like what you see, or have suggestions for improving this recap, leave a comment below, or email me at info@zeninvestor.org
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