Geopolitical Concerns – by Justin Vaughn

(Justin Vaughn, Editor, Options Trading Report)

Stocks rebounded last Thursday and Friday as the good news overrode negative news… Labor perked up as jobless claims were less than expected and demand for durable goods orders was strong. The Dow Jones Industrial Average snapped up 260 points Thursday with both the S&P 500 and Nasdaq Composite tracking up 0.45% and 0.6% respectively. Friday the Dow Jones hit another high for the “37th time this year.” More fresh data confirmed that inflation is moderating, responding to Mr. Powell’s efforts. As the week opened, oil crept higher to the $68 – $69 range as warring factions heighten in the Middle East. Gold edged higher to $2,644.30 as Jones Market Data is predicting a record quarter. The dollar was softer trading against the euro and the Juan currencies, its weakest value since July 2023.

Monday’s market was buoyed upward by Mr. Powell’s positive comments “that the possibility of more ‘giant’ rare cuts would not likely be needed if inflation continues to show ‘taming’ and the economy continues strong.” All indexes were shaky at open before he spoke, but turned abruptly positive after his comments reiterated that prospects of a recession were slight. He alluded to future rate cuts not to exceed 0.25%. Investors and traders ‘hopped on the bandwagon’ and finished the day satisfied that the Fed righted the market tone. The indexes finished up for Monday’s session as the S&P 500 added 0.4%, ending the month up 2% and for the quarter up 5.5% according to the Dow Jones Report. “As a time of real growth fears, positive company estimates on future earnings are welcome news and can easily boost equity prices further,” said Jan von Gerich, chief analyst at Nordea. The Bond market reacted to Mr. Powell’s comments also with the 10-year yield edging higher up to 3.789% from 3.751%, with the 2 year up slightly. Investors were dismayed Tuesday as the Iranian missile attack on Israel pressured oil. Prices moved higher, near $70.00 a barrel, up 3%, and benchmark crude hit $74.00 a barrel. As the Iranian attacks subsided, the market calmed and the indexes began to show slight gains.

Concerns of a widening war continued, gripping the market activity Wednesday as Geopolitical concerns heightened. Crude oil continued higher, with benchmark crude futures hitting $73.90. The Indexes opened near Tuesday’s closing, fluctuating most of the session, then equities edged higher. Other good news aided the market as “ADP data showed the U.S. private sector added over 145,000 jobs ending five straight months of slowdown and beating economists forecasts.” Coming tomorrow Friday The Bureau of Labor Statistics (BLS) will release the September Jobs report, giving the Fed good information on labor and recent trends. Friday’s jobs report was very strong as the economy added 254,000 jobs with the unemployment rate leveling at 4.1%. All three indexes picked up steam Friday.

U.S., and world wide companies are exiting Hong Kong and China in droves. Massive restrictions on all aspects of business operations, and crippling financial policies by the Chinese government (Xi Jinping) have and are driving U.S worldwide companies out of China. Hong Kong, the once financial jewel of all of Asia, after the takeover by China is a shell of years past as nearly all major financial institutions have exited. Major soft goods and industrial manufacturing facilities are producing less and less products, giving way to India, Vietnam, Mexico and many other Asian and South American countries. Once an economic giant, China now struggling to balance and survive economically.

RUMBLINGS ON THE STREET

Randall W. Forsyth, writer for Barron’s, “The Economy” Barron’s – “Whatever bullishness the equity returns reflect, gold’s performance suggests expectations that politicians will do whatever it takes to deal with the budget, inflation being the most expedient means by which to reduce the debt burden.”

Sebastien Page, chief investment officer ar T.Rowe Price, Barron’s – We don’t expect a recession in the next 12 months. But the problem is now that’s the consensus view,” says Mr. Page. “The market is pricing in a soft landing… if not something better.”

Steven M. Sears, writer for Barron’s, “The Striking Price” Barron’s – “Americans are enjoying a pinnacle economic moment. Many people have never been so wealthy. Anyone who has handled their investments with a modicum of good sense has a brokerage account balance at, or near, record highs.”

Andy Rothman, investment strategist at Matthews Asia, Barron’s – “The good news is that Xi’s thinking seems to be moving in the right direction. And as he recognizes that he hasn’t yet done enough, he is likely to soon overcome his stubbornness and deliver the rhetoric and policies that will rebuild trust among China’s entrepreneurs and consumers.”