The global equity pullback continues as the Dow Jones and S&P 500 weakness spreads to Asian with Nikkei 225, Shanghai and Hang Seng indices following the US market lower. Keep in mind that the trade tensions between the US and China are getting worse – not better – as market participants will come to grips with the reality of US history, the Bretton-Woods System with built in trade deficits that the US engineered since 1945. These trade problems with Germany and China were established decades ago and built to last. The trade war is only in the 2nd or 3rd inning, and it might go to extra innings.
Stocks in Japan, Australia, South Korea and other major players in the region are all down today. And with the members of OPEC meeting in Austria meeting to discuss crude oil output policy, global equity markets in the next two weeks will be volatile with some shocking downside moves. Stay short or hedge aggressively. All major markets in the trgion fell just minutes after the open today as Kospi – the Korean market – fell 0.89 percent and the Nikkei 225 falling 1.70%. Hong Kong`s Hang Seng Index fell 2.26 percent. Note that the potential for 1. US trade tensions and 2. slowing Chinese economy will have impact on the region in 2019 and 2020.
Also, factor in the recent selloff in FAANGs and US tech and equity indices will likely be exciting in the coming weeks and months. We at Classiarius firmly believe that the trade tensions with China will not see a solution for at least 2 or 3 years, increasing the probability of a recession in China and the US in the next 18 months.