The stock market fell hard this morning, following news that President Trump is set to announce his tariff plans. This is raising concerns of an international trade war, as President Trump continues to push his America First agenda in spite of threats of retaliation from China. I realize I’m a bit of a contrarian; however, a stock market bubble seems likely to me. Any market that can’t sustain the current rate of growth will eventually experience a pull back. With this being the longest bull run in history, the market is now showing signs of fatigue. The key to remember is that the masses are always wrong in the end. This will be no exception.
To expand a bit on the steel tariffs likely coming, it’s interesting to note that China is not even in the top 10 of countries exporting steel into the United States. However, China is currently unloading a large inventory of steel well below market prices. This is likely what has spurred President Trump’s steel agenda. In my opinion, the tariffs will create upward inflation on the U.S. economy that will harm many more than the tariffs will benefit. There are currently 90,000 U.S. steel workers who will certainly be winners as a result of this deal. With only 500 new jobs expected to be creates, the number who will be hurt far exceeds the 90,500 that will benefit.
Mortgage bonds are now at the top of their trading channel. Hopefully, bonds will be able to break out of the channel. If this happens, I feel we will see a nice improvement to mortgage interest rates. However, since breakouts are the exception and not the rule, floating remains risky.