You could have blown me down when I discovered that we’d gained 0.5% in the S&P/ASX 200 Index over the week. Of course, if it weren’t for President Trump’s out-of-control tweeting, we would’ve been a lot higher.

And given the big Dow drop overnight, once again due to the potential Trump trade war, it’s going to be ugly on Monday for our stock market.

Thursday’s Wall Street close saw the Dow up 240 points and we finished down 0.1 of a point. However, we should have seen a 30-point plus gain but Donald had to tweet that maybe the Chinese need tariffs on US$150 billion instead of the US$60 billion first suggested.

And while we wait for the Chinese response in this trade ping pong game, our stock market suffers, with the Trump tariff tantrum blocking the progress of our shares higher.

After this tweet, Dow futures were down 350 points and this follows a good day on the market on Thursday, when the White House was hosing down the likelihood of a trade war and Wall Street liked the vibe. However, Donald trumped this optimism on the potential trade war front by talking about bumping up the tariff imposts on China by an extra US$100 billion!

The day before the US President indicated that he wasn’t gunning for Amazon, after implying previously that the opposite was the case! For crying out loud – we’re not used to this kind of politics and Wall Street hates it.

But given Donald’s unpredictability, why can’t the market ignore his tweets? Well, you have serious people like JPMorgan’s chairman, Jacob Frenkel, warning that a trade war “is the greatest threat to the world economy” and as we’re a heavily trade-dependent economy, our stock market is giving into gravity.

“It’s still not a trade war – I would say there were some skirmishes, and there are skirmishes,” Frenkel said. “I think we should all remember the disaster of 1931 – always good intentions, to protect American jobs, and the result was a catalyst to the Great Depression. We should avoid it at all costs.” (CNBC)

On Friday, China returned fire, indicating US cars and iPhones could be added to the trade bans, if the President goes and doubles down on his tariff slugs on China.

And if Donald’s madcap tweets aren’t enough, our market is coping it with the Royal Commission’s impact on bank share prices and Telstra keeps doing nothing to arrest its share price slide. In our Friday webinar, Roger Montgomery, a long Telstra hater, said the company is starting to “look interesting” but he wasn’t pressing the “buy” button yet.

Six months ago, CMC’s Michael McCarthy said he would like Telstra at $2.78 but I thought he was being too negative. He might end up being right but I think I’d dive into the telco if it goes under $3, even though I have my doubts about its management team right now.

On other local notable news, Myer went up 7.3% to 37 cents on reports the South African Woolworths Holdings was eyeing off the hapless retailer. The stock’s rise might be short-lived, as Woolies SA denied the reports.

Meanwhile, Fairfax revealed that Aristocrat (which is the darling of the analysts with 20% upside, if they’re on the money) lost a US court case over a product of theirs, which was ruled to be “illegal online gambling”. However, Citi expects a win on appeal and has a target price of $32.20. The stock finished the week at $23.56!

And for Trump believers who think his negotiating tactics are like a bluff poker player, with Donald holding all the aces, note that iron ore prices went up when White House officials pooh poohed trade war talk but they slumped after the President tweeted about tripling the tariffs on China!

There is a contrarian play for Donald’s supporters, who think he’s too smart to really start a real trade war. Gee, I hope they’re right!

By the way, the US jobs report was soft overnight, with 103,000 jobs showing up in March, rather than the 185,000 expected by economists. Meantime, the unemployment rate stayed steady at a low 4.1%. So what happened? I love this from The New York Times: “February’s report was a barnburner: Companies added jobs at the strongest pace since 2015, and the labor force gained hundreds of thousands of workers. The report for March wasn’t as strong, but still extended a remarkable run in the job market.”

My only hope is that Donald’s trade barn-burning doesn’t create a fire and economic ‘tit for tat’ war that turns a correction into a crash. And from an economic point of view, the US is our political/military ally but China is the number one buyer of our exports!

What I liked

• Retail trade rose by 0.6% in February, after rising by an upwardly-revised 0.2% in January (previous up 0.1%). Annual sales growth lifted from 2.1% to a 7-month high of 3%.
• The Australian Industry Group Performance of Manufacturing Index rose to a record high 63.1 points in March, up from 57.5 points in February. However, the CBA/Markit Manufacturing Purchasing Managers’ Index fell from 55.6 points in February to 54.3 points in March – a six-month low. Readings above 50 points indicate that the manufacturing sector is expanding.
• ANZ Job Advertisements were flat in March, after declining by a downwardly-revised 0.4% (previously -0.3%) in February. Job ads are still up 11.5% on a year ago.
• The Federal Chamber of Automotive Industries reported that new vehicle sales hit a record high of 1,201,309 units in the year to March, up by 2.5% on a year ago.
• Annual commercial building approvals stand at a record high of $47.6 billion.
• A trade surplus of $825 million was posted in February. The rolling annual surplus narrowed from $10.46 billion to $8.34 billion.
• The CBA Purchasing Managers Index (PMI) for the services sector rose from 54.2 points in February to 55.6 points in March. The Australian Industry Group (AiG) Performance of Services Index (PSI) rose from 54.0 points in February to 56.9 points in March. (Readings over 50 signify services sector expansion.)
• Consumers’ inflation expectations rose to 4.7% last week, up from 4.3% in the previous week. This is the equal highest reading in 14 months and the RBA wants inflation as a positive sign for the economy.
• The ISM services gauge in the US fell from 59.5 to 58.8 in March but any result over 50 means expansion.
• The Markit manufacturing survey in the US rose from 55.3 to 55.6 in March. Construction spending rose by 0.1% in February (forecast +0.4%).
• The US job numbers could slow down the pace of interest rate rises and, of course, the potential trade war will as well. Slower rate rises could sustain the bull market, unless Donald’s tariffs kill it off before hand!

What I didn’t like

• The CommSec index of luxury marques has been falling. In fact, luxury vehicle sales hit record highs in the 2016 year, with sales totaling 106,658 units. In the period since, annual sales of luxury marques have fallen by almost 7%.
• The weekly ANZ/Roy Morgan consumer confidence rating fell by 1.6% to 115.5. Confidence is up by 0.6% over the year and above the average of 113.6 since 2014 and average of 112.9 since 1990. Trump’s impact on stocks isn’t helping.
• The CoreLogic Home Value Index of capital city home prices fell by 0.2% in March to stand 0.8% higher over the year. The national home price index was flat in March to be up 1.2% over the year. It was the smallest annual growth in national prices in over five years. That said, it’s what the RBA wanted.
• Council approvals to build new homes fell by 6.2% in February after rising 17.2% in January and falling 20.7% in December.
• The ISB/TIPP economic optimism index in the US eased from 55.6 to 52.6 in April.
• New applications for unemployment benefits (jobless claims) in the US rose by 24,000 to 242,000 (forecast: 225,000) for the week ended March 31.

We’re being Trumped – can we make money out of it?

It’s clear President Trump is playing a high stakes game with his trade battle with China and our stock portfolios are paying the price. However, if a trade war is avoided and the US wins concessions from the Chinese, then we could be looking at a buying opportunity.

In early February, the S&P/ASX 200 Index was at 6121 and we’re now at 5788. So if the trade war goes away, a rebound for our market looks very likely and that could be a 5.7% gain, which I guess is what Donald has cost us with his tariff tantrums.

The only question is: will we avoid a trade war?

The Week in Review:

• It was a short week this week because of Easter but we still had a bumper report that was sent on Thursday. Paul Rickard discussed the Aussie share market and how the trade fears have put pressure on our portfolios.
• We didn’t go up with Wall Street, but we went down with it, so what’s ahead for Aussie equities? Charlie Aitken explored and said it’s always darkest before the dawn.
• Our perseverance with Santos has paid off while a tech-stock retreat gives predators a sniff. Don’t miss this one by Tony Featherstone!
• What should your SMSF look like if you need it for 40 years? 30 years? Or 20 years? Diana Saad of BT Financial Group gave all the insights into SMSFs and your retirement horizon.
• In this week’s Professional’s Pick, Andy Gracey from Australian Ethical Investment explained how 3P Learning is ahead of its peers.
• It was a short week for Buy, Hold, Sell – what the brokers say, post Easter, and BHP and CSL were upgraded.
• Plus Graeme Colley answered a curly Question of the Week on pensions and expenses in an SMSF.

Top Stocks – how they fared:

What moved the market?

• This week has been all about Trump, Trump and more Trump!
• Tensions between China and the US over tariffs has seen the trade war escalate. The latest – China has issued a $US50 billion list of US goods for potential tariff hikes while the US has hit back with $100 billion in additional tariffs on China.

Calls of the week:

• “Ex pollies rescue Turnbull and the economy from BS!” Read my article from Switzer Daily yesterday.
• Malcolm Turnbull’s grandson has been given the royal tick of approval after the PM shared photos with Prince Charles and the Duchess of Cornwall.
• Toyota has been the latest sponsor to drop David Warner. Big call! How many sponsors does he have left?
• “Not for sale” said AGL’s Andy Vesey as he defies pressure from the Turnbull government to sell the Liddell power plant.

The Week Ahead:

Australia

• Monday April 9  – Performance of Construction (March)
• Tuesday April 10 – NAB business survey (March)
• Wednesday April 11 –  Monthly consumer confidence
• Wednesday April 11 –  Speech by Reserve Bank Governor
• Wednesday April 11 –  Dwelling starts (December quarter)
• Thursday April 12 – Housing finance (February)
• Thursday April 12 – Credit & debit card lending (February)
• Friday April 13 –  Financial stability review

Overseas

• Tuesday April 10 – US Producer prices (March)
• Tuesday April 10 – US NFIB business optimism (March)
• Wednesday April 11 –  China inflation (March)
• Wednesday April 11 –  US Consumer prices (March)
• Wednesday April 11 –  US Monthly budget (March)
• Wednesday April 11 –  US Federal Reserve meeting minutes
• Thursday April 12 – US Import & export prices (March)
• Friday April 13 –  China trade (March)
• Friday April 13 –  US JOLTS Job openings (February)
• Friday April 13 – US Consumer sentiment (April)

Food for thought:

“There’s nothing like a jolly good disaster to get people to start doing something” Charles, Prince of Wales.

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:

In light of the Commonwealth Games starting this week, here is a graph that shows the regions which have hosted the games since 1930.  Australia has hosted the games five times.

Source: Queensland Government

Top 5 most clicked:

1. A rough first quarter, but it’s always darkest before the dawn – Charlie Aitken
2. Buy, Hold, Sell – what the brokers say – Rudi Filapek-Vandyck
3. Question of the Week – Graeme Colley
4. Santos bet pays off for takeover target portfolio – Tony Featherstone
5. Trade fears put pressure on portfolios – Paul Rickard

Recent Switzer Super Reports:

Thursday 5^th April 2018: Darkest before the dawn

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.