The stock market recovery topped out and failed last week on the hawkish tone of new Fed chairman, Jay Powell, and President Trump’s announcement he will impose steel and aluminum tariffs across the board.  Most of the indices recovered off their lows to rally higher on Friday in the hope that the U.S. administration will walk back the implementation of the restrictions on and tough trade talk.  Dream on.

World Tariffs

Note the world map of the average applied MFN tariff by country.  Very informative.

The perception the U.S. is the only open market in the trading world and raped by protectionist nations is just not right.  We calculated that around 40 countries, or territories,  have a lower or within about one percent of the U.S’s simple average applied MFN tariff.

Here’s an idea.  If China wants to dump its steel at cut-throat prices in the U.S,  pass legislation fixing that price or they can no longer sell into the U.S. market at higher prices.   We suspect that would work and consumers would get a great deal.

Market Risk And Bearishness Increasing

Risks are building in the markets but so is bearishness.   Though markets are going to do what they are going to do in short-term, we have learned there are still not a lot of natural sellers, and if the market gets too offside,  you can bet the other side for a trade.

The fast money is now so short-term focused, especially the growing number of HFTs that don’t hold overnight risk, they have no patience and must cover quickly especially if the market begins to move against them.   We do believe investors are going to get a chance to buy stocks and much lower levels, however.

Market Focus Next Week

The big focus this week will be on the wage data in Friday’s employment number and the Trump tariff implementation, and the fallout from today’s Italian elections.


Then there is the political chaos in Washington and growing worries over a massive blue wave election in November, which will only increase after the primaries begin.

Watch This Name:  Conor Lamb

Big focus on the March 13th special election in Pennsylvania’s 18th congressional district, which President Trump won by over 20 points in 2016.   Though it takes place in deep Trump country, the Democratic candidate, Conor Lamb, is now statistically tied in the latest poll and has a significant financial advantage over Republican Rick Saccone.

Republicans are in panic mode and this election could move markets and raise fears of a Grant-like midterm lambasting for Republicans in November.   President Grant’s Republicans lost 93 congressional seats in the 1874 midterms.

A more dismal performance considering there were only 292 seats in the lower chamber back then as compared to 435 today.   The Republicans loss  31 percent of the total House seats in 1874.  On a similar proportional basis that would equate to a 139 Republican seat loss in the House today.  Fat tails, yes.  But, nonetheless,  OUCH, just thinking about it!

Some speculate the steel tariffs are aimed at shoring up support for the Republican candidate in Pennsylvania’s 18th district.

Stay tuned.