NewsWire: If you’re on Wall Street, look for fireworks…
From the Stansberry NewsWire team:
For regular folks, the Fourth of July signifies the beginning of the summer holiday season…
And economically speaking, no one usually cares about the Fourth of July week… The government typically shuts down. Fed speakers are non-existent. And the hedge-fund community heads from New York and Connecticut pack up and hop “out east” to the Hamptons.
Consequently, not much tends to happen in the markets. But that might not be the case this year…
The most important market event this week happens Friday: when the initial U.S. tariffs on Chinese imports go into effect. The original proposal was for $50 billion… But the most recent suggestion is $34 billion with another $16 billion worth of goods under review. China has stated it is prepared to impose a similar tariff on the U.S.
Expect it to happen.
President Trump has been vocal about sending a message to China and all our trading partners. The markets have likely priced in this move.
The real question is what will happen next?
Will we move forward with the $200 billion to $400 billion in additional tariffs that have been proposed? That’s what the markets haven’t priced-in. They’re hoping the White House is only sending a message. They’re expecting the administration to arrive at a solution shortly thereafter. That will make the difference.
Over the weekend – and not helping matters – German Chancellor Angela Merkel’s biggest ally, the Christian Social Union, was said to be unhappy with the EU’s bargain on immigration. Its leader, the country’s interior minister, felt nothing had changed under the recent agreement. He was reportedly preparing to tell police officers to turn immigrants away at Germany’s borders. This would be in direct defiance of Merkel’s orders. If Merkel can’t placate the situation, it could throw her coalition into crisis.
Other than Friday, the market week should be ho-hum.
It began over the weekend with data from China’s Purchasing Managers Index. The data were slightly weaker than the prior period, but nothing worth getting excited over. The short camp will point to it as Chinese growth slowing in the face of a trade war. But the composite figure of 54.4 versus the prior figure of 54.6 still points toward solid growth.
The other big data will come Thursday, from the Federal Open Market Committee (FOMC) minutes. Expect news to be positive for U.S. growth. If the FOMC rhetoric is hawkish enough, this could be more fuel for the U.S. dollar, weighing on the S&P 500.
So while history says this week should be boring, this year might be anything but… And what remains to be seen is whether we’ll exit with more questions than answers.
As we’re constantly reminded, the markets hate uncertainty.