Wall Street was up on President Trump signing a US$1.3 trillion spending bill, which he said he would never do again but the tariff story came back to haunt stock players with a China official not ruling out ceasing to buy US Treasuries as payback for the proposed $US50 billion slug on Chinese imports.

And this is on top of 128 US products that China has put on its blacklist, if Donald goes ahead with his tariffs! This has to explain why a lot of US listed companies’ share prices have fallen and it’s not great news for our stock market either.

Just before the close on the New York Stock Exchange, the Dow Jones index was down close to 400 points and is in correction territory. Meanwhile, the Nasdaq is being belted as the Facebook crisis continues to haunt tech stocks, with some pondering if some speed-limiting regulations could be coming down the information super highway.

Recently, one subscriber didn’t like me being objective about President Trump’s trade war-creating tariffs but the market has vindicated my objectivity. I have to point out that our market went from 6049 on Donald’s election day to 5820 on Friday afternoon. That has been over the time when our economy has improved substantially and our last reporting season was, as Craig James of CommSec implied, positive. “To recap, the recent earnings season – for companies largely reporting half-year results to December 2017 – can be described as solid, not spectacular,” he told me. “Effectively, companies seem to be laying the groundwork for the future.”

The fall in US stocks, which we follow slavishly, is related to a number of things and I’ll list them in order of importance:

• Trump’s tariffs and the possible retaliation effect.
• The good performance of the US economy and its possible impact on inflation and then interest rates.
• The rising US budget deficit and its possible impact on interest rates.
• Facebook’s data breach linked to the US election and dodgy Russians and its negative impact on the tech share prices.

All four of these reasons have Donald’s fingerprints over them, with the second one a function of some of his policies and their positive impact on the US economic outlook.

All up, (provided this trade war stuff doesn’t get really silly) my market-playing view is that we’re looking at another buying opportunity but I’d be more confident of this call if Donald Trump was a more conventional US President. His capacity to throw new curve balls at the stock market can’t be underestimated. I’m hoping the mid-term elections due in November will make him start dreaming up market-positive plays for the sake of Wall Street and our stock market!

To the local market and the S&P/ASX 200 index dropped 116 points (or 2%) on Friday, after the Dow lost 724 points after Donald gave it to China, tariff-wise, blaming their theft of US intellectual property as the key reason for the $US50 billion smack in the face.

The fact that the S&P/ASX 200 only lost 2.2% for the week, and 2% of that followed Donald’s ‘tariffication’ of China on Thursday, shows his role in hurting our market.

A key fact to explain that freaky Friday for stocks was that close to 33% of Australia’s exports go to China and these are mainly raw materials. Not surprisingly, BHP lost 3.1% to $28.77 and Rio Tinto gave up a big 4.4% to finish at $73.44.

And our banks have had to deal with not only economic cyclone Donald, which has hurt financials in the US too, there’s also the Royal Commission. CBA lost 2.8% to $72.81, Westpac dropped 2.5% to $28.85, ANZ gave up 1.7% to $27.70 and NAB slipped 1.7% to $28.97.

What I liked

• In the 12 months to February 2018, the Budget deficit stood at $18.6 billion (around 1% of GDP). This is the smallest rolling annual deficit for almost nine years!
• Employment rose for a record 17th straight month, up by 17,500 in February, after rising by 12,500 in January (previously reported as a rise of 16,000 jobs). Full-time jobs rose by 64,900, while part-time jobs fell by 47,400. Economists had tipped an increase in total jobs of around 20,000. Over the past year, a record number of 420,700 jobs were created.
• Unemployment rose from 5.5% to 5.6% BUT the participation rate rose from 65.6% to a 7-year high of 65.7%. In trend terms, the participation rate hit a record high of 65.7%.
• Since mid February, ASX 200 companies have paid out around $3.3 billion in dividends to shareholders. But dividend payouts really start to ramp up from today. Overall, around $22 billion will be paid to shareholders over coming weeks.
• The weekly ANZ/Roy Morgan consumer confidence rating rose by 2.2% to 118.5. Confidence is up by 4.1% over the year and above the average of 113.6 since 2014 and the average of 112.9 since 1990.
• Economy-wide spending remained solid in February. The Commonwealth Bank Business Sales Indicator (BSI), a measure of economy-wide spending, rose by 1% in trend terms in February, matching the January outcome and the strongest pace of growth in four years.
• Dividends totaling $18 billion will be paid out by listed companies to their shareholders in the next four weeks.
• The Internet Vacancy Index rose by 0.6% to 85.9 in February in trend terms, after increasing by a revised 0.8% in January (previously reported +1.2%). The index has risen for 16 consecutive months – the longest period of growth since March 2011. The index has increased by 10.5% over the year to 5½-year highs.
• The largest growth in job vacancies by detailed occupation is engineers, up by 30.2% over the year to February – the strongest growth rate in five years. Automotive and engineering trades workers job advertisements are up by 26.7%.
•  Western Australian job advertisements rose by an annual growth rate of 14.8% over the year to February – the strongest increase in 2½ years.
• The Bureau of Statistics reports that Australian home prices rose by 1% in the December quarter to stand 5% higher over the year.
• Australia’s population expanded by 395,613 over the year to September 2017 to 24,702,851. Overall, our annual population growth rate rose marginally from a downwardly revised 1.6% (previous 1.61%) to 1.63% – still near the fastest population growth in 3½ years. This is good for economic growth.
• As widely expected, the Fed increased the target range for the federal funds rate by 0.25% to 1.50% -1.75%. This was the sixth increase in interest rates of the current monetary policy tightening cycle.  The decision by the Fed voters was a unanimous 8-0. The Fed is forecasting two further rate increases in 2018 and three further hikes in 2019. The 2020 projection is for two interest rate hikes.
• Oil prices had a good week in what was largely a bad week for commodity stocks.

What I didn’t like

• World share markets fell on Thursday – US time – on fears of a trade war between the US and China. US President Trump has indicated that tariffs may be applied on US$50 billion of Chinese goods.
• The Facebook revelations and what they did to tech share prices.
• The measure of consumer inflation expectations in Australia two years ahead decreased to 4.1% – the equal lowest level in 9 months – down from 4.7% in the previous week.

My special reason for being cranky at Donald

Because regulators wasted a lot of our time when we were trying to list my Switzer Dividend Growth Fund (or SWTZ), we went on the market in February 2017 rather than the planned September 2016, which meant we missed the Trump bump. My fund does well when the market rises because it gets capital gain added to its reliable dividend stream. Donald’s tariffs have taken the unit price from $2.59 to $2.49, so you can see why I’m not happy.

And the second reason is that on Tuesday it was announced that Contango Asset Management (CGA), our partner in SWTZ, was buying our share in the fund. However, because we believe in the company’s future, we accepted scrip and we now own a sizeable chunk of CGA, which now has my son, Martin, as its CEO.

Before the announcement to the market, CGA was 44 cents but by Wednesday morning it was 54 cents. So the market gave the idea a 20% price rise tick. Then along comes dear Donald and his China slam dunk and CGA’s share price ended the week at 49.5 cents.

I think you can see why I say: “Not happy Donald. Not happy.”

The Week in Review:

• The market lately has been volatile and this week I took a look at one scary factor that hurt my optimism for stocks! It’s a crazy creature but stockholders ignored the bond market at their peril.
• Bill Shorten has caused some uproar the past few weeks and Paul Rickard asks if you will be impacted by Shorten’s naked tax grab. He may still be the leader of the opposition but his proposed policy is vexing many self-funded retirees.
• Further capital gains could be ahead for Kidman Resources as it transforms from speculative explorer to large-scale producer and Charlie Aitken
• James Dunn shared 3 top A-REITS for yield.
• Was the Wesfarmers demerging from Coles a good or bad decision? Tony Featherstone said demergers work best when assets involved are clearly unrelated, giving the offspring a good chance of being stronger on its own.
• In the first Buy, Hold, Sell – what the brokers say, the trend is on the upside with brokers upgrading South32 and Wesfarmers.
• And in the second Buy, Hold, Sell – what the brokers say, brokers have been taking a rest leading up to Easter, and there were just a handful of actions, including an upgrade for Brambles.
• In this week’s Hot Stocks, a rare-earth producer has cornered the market, and the recent market drop has made other companies look attractive. Find out what they are.
• It might look like an investment bank but it yields like a fund management business. Macquarie Group is this week’s Professional’s Pick.
• Plus, in Questions of the Week, Paul Rickard answers am SMSF trustee’s question about Labor’s ‘naked tax grab’.

Top Stocks – how they fared:

What moved the market?

• One word. Trump. His recent tariff changes have really moved the market this week and the latest is he has signed a presidential memorandum that could impose tariffs of up to $US60 billion ($77 billion) on imports from China.
• The Federal Reserve announced Wednesday that it raised its benchmark interest rate by 25 basis points to a range of 1.50% to 1.75%. Over the next few weeks, this 0.25% increase will impact credit cards, adjustable-rate mortgages, car loans, and other credit lines that don’t have fixed rates.

Calls of the week:

• President Donald Trump made a big call to hit China with tariffs. Are we edges away from a global trade war?
• I said in my Switzer Daily article on Friday, that Trump’s trade war will thump the stock market and it did!

The Week Ahead:

Australia

• Tuesday March 27 – Census data (2016)
• Tuesday March 27 – Speech from Reserve Bank official
• Wednesday March 28 –  Engineering construction (December quarter)
• Thursday March 29 – Detailed labour force estimates (February)
• Thursday March 29 – Finance & wealth (December quarter)
• Thursday March 29 – Job vacancies (February)
• Thursday March 29 – Private sector credit (February)

Overseas

• Monday March 26  – US National activity index (February)
• Tuesday March 27 – US Case Shiller home prices (January)
• Tuesday March 27 – US Richmond Fed index (March)
• Tuesday March 27 – US Consumer confidence (March)
• Wednesday March 28 –  US Advance trade balance (February)
• Wednesday March 28 – US Economic growth (December quarter)
• Wednesday March 28 – US Pending home sales (February)
• Thursday March 29 – US Personal income (February)
• Saturday March 31 – China Purchasing manager indexes (March)

Food for thought:

“A tiny leak can sink a ship.” Donald Trump

Stocks shorted:

ASIC releases data daily on the major short positions in the market. These are the stocks with the highest proportion of their ordinary shares that have been sold short, which could suggest investors are expecting the price to come down. The table shows how this has changed compared to the week before.

Chart of the week:

 Federal Reserve Dot Plot of Economic Interest Rate Projection 

Each dot represents a projection by a  US Federal Reserve board member (15 in total) on where he/she expects the US Fed funds rate to be at the end of that calendar year

Source: federalreserve.gov

 Top 5 most clicked:

1. Will you be impacted by Shorten’s naked tax grab?
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2. The one scary factor that hurts my optimism for stocks!
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3. Let your winners run, even the speculative ones – Kidman Resources update
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4. 3 top A-REITS for yield
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5. Buy, Hold, Sell – what the brokers say
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Recent Switzer Super Reports:

Monday 19^th March:  At your peril

Thursday 22^nd March: Shine on

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.