June 28, 2018

China is Done Playing "Tariff Tag"... It's Now Looking to Crash the Markets

China has gotten tired of playing “tariff tag” with the Trump administration. It’s now playing a new game called the “devalue stock dump.” It consists of China aggressively devaluing the Yuan in an effort to crash the US stock market.

If you think I’m being overly dramatic here, have a look at the below chart. This current devaluation is already on par if not worse than those of August 2015 and January 2016.

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By the way, those last two devaluations (red boxes) resulted in the S&P 500 dropping 11% and 12% in less than one week.

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Put simply, China is done messing around. It is actively trying to crash the US stock market to send a message to the Trump administration. China knows that President Trump views the stock market as a “report card” on his performance as Presidency.

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Bear in mind, most Emerging Markets (including China) are already in bear markets, having dropped ~20%. If the US stock market follows suit, we’re talking about the S&P 500 down in the 2,3-00-2,400 range.

June 29, 2018

Did China and the Trump Administration Just Make Up?

As we noted earlier this week, China, tired of the “back and forth” with the Trump administration on trade negotiations, has resorted to devaluing the Yuan.

The goal here was to induce another sharp sell-off in stocks, similar to the ones induced by China’s August 2015 and January 2016 devaluations. By the way, those last two devaluations (red boxes) resulted in the S&P 500 dropping 11% and 12% in less than one week.

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Fast forward to today and the $USD:Yuan pair is down SHARPLY. The $USD index is also sharply down. And the highly inflationary Australian Dollar is up sharply.

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Of course, one day does not make a trend. But today is the best day for stocks, from a currency perspective, in several weeks.

 Have a nice weekend!!!

Best Regards.

Deo Talaverano.

Chief Market Strategist DHF.

George Town. Cayman Islands.