The Word from Main Street

Market Update for the Week of June 17th, 2019

The first day of summer officially starts June 21st, giving most of us opportunities to take advantage of long summer days for vacations, outside activities, outdoor projects, or maybe just spending more time with family and friends. There’s no better time to turn off the television, put away the newspapers/magazines, and get away from all the “noise” incessantly hurled at us every minute of every day. Don’t get us wrong, news is essential and some of it is legitimate, but in many cases, the news media “chicken littles” us for ratings and profits. May, in particular, was a nasty month for the markets primarily because news “headline risk” was huge, as it has been for years now. As Jason Bodner points out in a recent newsletter, “normal-level stories get inflated into life-or-death fear campaigns, and small whispers of hope of good news can set the market on a major bull run.” This is the noise we warn investors about, which reinforces our confidence and convictions in using objective, unemotional, unbiased methodologies based on Dorsey Wright’s momentum and relative strength money management tools.

Some of the key points ignored by the press in their extremely overhyped reporting on the trade wars, for example, included the following (source: Evan Horowitz, Director of Research Communication at FCLT Global) :

  • While agricultural exports to China fell a staggering 63.6% in 2018 — from $16 billion to $6 billion — total agricultural exports dropped just 4.5% as U.S. farmers significantly increased sales to Vietnam, Egypt, Argentina, and the Netherlands.
  • Farmers' incomes in 2018 held up even better, with total cash income from crop sales dropping only 1.3%. Among soybean farmers, who rely heavily on exports to China and have been held up as the poster children for imperiled industries, sales revenue actually rose ever so slightly.
  • The 25% levy on $200 billion worth of Chinese consumer and manufacturing products are expected to cost the average U.S. family $831 per year. That's not insignificant for sure, but it’s roughly equivalent to the average tax benefit households received from the 2018 Republican tax cuts, or about a $1,000. Polls suggest many Americans didn't even notice.
  • China threatens to cut off U.S. access to their rare earth minerals and blacklisting major U.S. corporations. Interestingly enough though, the Chinese have held off on this threat because the last time they did it in 2010, it cost them dearly. Blocking sales of rare earth minerals back then allowed smaller suppliers to widen their hold on the market. 

Now for our latest DALI report:

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