Another week of market volatility

As the month wound down, so did stocks. Pronouncements from Washington dominated the market’s direction on a daily basis. We can expect to see that trend continue as the summer doldrums reduce liquidity and exaggerate market swings. The adage of “sell in May,” however, did not fulfill the bears’ expectations this year. Actually, the month of May has been pretty good for stocks recently. The S&P 500 Benchmark Index gained a smidge over two percent for the month this year. That’s not to say those gains were easy. The stress level for those who are trying to trade this market is through the roof. And that’s because two opposing trends are impacting the financial markets. The first is short-term volatility caused by political events. At the moment, these are mostly trade-related: tariffs and counter-tariffs, NAFTA concerns, and China trade. All of the above have generated a war of words (or tweets) and, depending on someone’s mood in the morning, can spark 1-2% movements in the index in either direction. The falsehoods, about-turns, and misinformation have day traders going crazy. And don’t forget the international events. This week, Italy dominated trade, as a political/financial crisis may be brewing in Europe’s fourth largest economy. A new prime minster, Guiseppe Conte, was appointed Friday as an uneasy coalition of populists and right-wingers agreed to compromise in the wake of a severe financial downturn in Italian financial markets this week. We will wait for future developments (see my column published yesterday on the subject) before giving the green light to Italy and Europe. At the same time, the Trump/Kim show continues. The off...

Markets catch their breath

It was one of those weeks where stock market indexes needed a pause before marching higher. The pullback was orderly and shallow, which is just what the bulls like to see, if the markets are going to move higher from here. The culprits (if you are looking for catalysts for this week’s minor declines) were interest rates (the ten-year bond reached 3.10%), temper tantrums out of Kim Jong Un (peace talks canceled with South Korea) and higher oil prices (renewed U.S. sanctions against Iran). A stronger dollar could also be added to the list, since the greenback’s recent gains are bad for exports. However, these are all short-term worries and could rapidly disappear in the weeks ahead. The rise in interest rates have the markets spooked. The Ten-Year Treasury bond is at its highest level since 2011. That alone is cause enough for concern among two-thirds of Wall Street. These players are so young that this is the first time they have confronted a rising interest rate environment. The same could be said for those who trade currencies. Since historically, rising rates meant a stronger dollar and weaker stock markets, why not ump on the band wagon now and sell? And so, for a week or two, traders will play that game before something else diverts their attention. For anyone who has lived through past rising rate cycles, this is simply the first inning in a nine-year game. We know that rising rates are initially good for stocks. It will be a year or two before interest rates reach a level that could curtail growth in the overall economy....

The Trump trade bluff

This week, our fearless leader upped the ante on the tariff tiff with China. It went like this: Trump announced his list. China announced theirs. And at the end of the week, the president sees them one better. Aside from the volatility it is causing in the stock markets, not much besides headlines has been accomplished. Are you seeing the pattern yet? Think back to Trump’s school yard diplomacy with Kim Jong-un, the leader of North Korea. First, a furious exchange of tweets and name-calling between the two. That was followed by saber-rattling on both sides. More test missiles. Naval ships steaming toward the Peninsula. The media spent days explaining the “what ifs” while stocks went up and down. In the end, the two neighborhood bullies now appear willing to play nice and meet at the end of the month. I fully expect our president to come out of the meeting extolling “Fatty the Third” as his newest and dearest best friend. Now compare that to the tariff turmoil. Tweets, counter tweets, threats, etc. are flying this way and that; but so far, it’s all smoke and mirrors. Investors here in the U.S. are still reacting like puppets on a string, but elsewhere governments and stock markets are disengaging from these Trump tactics. Take Thursday night’s announcement. Trump ordered his trade rep, Robert Lighthizer, to “consider” an additional $100 billion in trade tariffs against China. By the time he does all that studying, a few months will have passed. In the meantime, things change and there is no guarantee that any recommendations will ever see the light of day....

Trump’s trade wars sink markets

World markets declined again this week. Despite world condemnation, which included most of America’s economists and corporations, Donald Trump unilaterally forged ahead in implementing his own brand of protectionism. Investors fear the consequences. While tariffs on imported steel and aluminum are still being negotiated, the president has upped the ante and is now pursuing China. The United States has long accused China of stealing our intellectual property. The Chinese, of course, have denied that and so, for years the discussions went round and round–until now. On Thursday, our president announced his intention to slap $60 billion of tariffs on 1,300 product lines of Chinese imports. As a result, all three averages experienced a major market sell-off. Investors and corporations alike fear China’s response. The media is spewing out lists of companies that will get hurt the most by a Chinese trade war. One of the most vulnerable areas is America’s bread basket. China imports a lot of food from us. We are, in fact, China’s second largest trading partner in the agricultural area. Investors are worried that China could hit that sector hard. That makes sense since that area of America is where Trump’s base is strongest. The Chinese are well-schooled in American politics. Remember the response of our European trading partners on steel and aluminum tariffs. They responded by threatening tariffs on export items important to Paul Ryan’s and Mitch McConnells’ home states. But unlike steel and aluminum workers that together only amount to a few hundred thousand jobs, a Chinese tariff on soy beans, for example, could decimate our farming sector. What better way to retaliate against...

Medicare premiums and your income

We all know that Medicare is not free. Once we enroll in Part “B”, and “D”, we start paying monthly premiums. What many consumers fail to realize is that how much you pay depends upon how much you make. For most of us, this is a moot point. We assume that we will be retiring at 65 years old (at the same time Medicare kicks in) but that assumption is no longer accurate. The reality is that Social Security, retirement, and Medicare can happen at different times in your life. Take, for example, Social Security benefits. Every year the target date for full retirement creeps higher. It used to be 65, but now, for many, it is edging up to almost 67 over the next few years. When that occurs, a worker will usually sign up for Medicare “A” but delay enrolling in Parts “B” and “D” until after they retire and are no longer covered by their company’s health insurance program. What most applicants don’t know, until it is too late, is that your monthly Medicare premiums will be based on your last two years’ annual income. But the actual logistics of that can be confusing. Here’s why. Your reported income follows a governmental processing chain where once the IRS processes your tax returns, they pass that information on to Social Security, which, in turn, feeds the data to Medicare, which then determines your premiums based on those numbers. Let’s say you are applying for Medicare “B” and “D” right now. For starters, most of us are just now filing our tax returns for 2017 (even though we...

Trade trials trip up investors

Stocks rose and fell throughout the week as tariff fears spooked world markets. Steel and aluminum on the American side. Peanut butter and motorcycles from Europe. Who knows what China and the rest of Southeast Asia will throw into the teapot? On a day-to-day basis, traders bought or sold stocks, bonds, and commodities based on their judgement of whether the president would announce tariffs on steel (25%) and aluminum (10%). Once he does (and he did so on Thursday) say the pundits, a trade war of “mammoth” proportions could ensue. Don’t you just love it? The entire tempest, which is feeding on itself, is putting our Twitter-in-Chief, exactly where he always wants to be—the center of attention. Is this truly the end of free trade and the demise of the global economy, or will “The Donald” come to his senses in the nick of time? You must admit that there is never a dull moment when it comes to the antics emanating from the White House. Consider this week’s departure. We are now at number 19. That is the number of officials who have quit, been fired, or no longer serve the president in the year since he was elected. This week it was Gary Cohen, the president’s chief economic advisor, who resigned over the tariff issue. You could say that the nation is simply being treated to a new season of “The Apprentice,” only this reality show is being carried by every channel both here and abroad. We are now waiting for the new contestant who replaces Cohen. Will he (and you know it will be a “he”)...