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Donald’s tariffs have done it again to our portfolios!

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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:

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

What I didn’t like

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:

Top Stocks – how they fared:

What moved the market?

Calls of the week:

The Week Ahead:

Australia

Overseas

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

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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.