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Perfect Storm for Stock Correction, Our Views

Perfect Storm for Stock Correction, Our Views

The ongoing risk of a trade war induced selloff is increasing and some traders and investors are now preparing by reducing longs and hedging positions. With the sharp selloff last week, and the possibility of a follow through on the downside, it is now becoming clear that the Fed rate cut combined with their more hawkish-than-expected policy outlook will be looked at as a pivot by next month. This is how we view it – a Fed injected shock to global indices. The S&P 500 could fade to about 2,750 in the coming weeks as a result of this disruption in markets and the realization that the US and China are digging in for a long-term battle.

A major stock selloff is possible in the coming weeks – protect yourself.

Our Views: While the future of US-China relations are difficult to read, we know that it will not be cooperative. China has hard-liners in place who are strongly opposed to any deal that would put the future of the CCP and the nation in an awkward position – both sides want a deal but a deal that will allow them to position themselves for the future. President Xi has a lot on his plate and that includes the US relationship and the Hong Kong uprising, so expect the Chinese to move to a hard-line approach all all fronts. China is now on the center stage of world affairs. More market volatility is possible.

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