Hey There Income Hunters,
The crash in Chinese tech and tutoring stocks is a macro force that has the potential to cause tremendous volatility for global markets.
Although China says their moves are intended to reshape market competition and lower market entry barriers, these claims are falling on deaf ears as their actions show little concern about shutting off foreign capital flow into China.
Instead, China is beginning to deploy its new anti-foreign sanction law … Initially the new sanctions have been imposed on individuals, including commerce secretary Wilbur Ross, in response to recent US sanctions on Chinese officials in Hong Kong.
Reciprocal counter-sanctions include US Congressional-Executive Commission on China and the National Democratic Institute for International Affairs.
Turning up the Heat on the US/China Conflict
These sanctions impose an Asian deflationary force that resists US, UK, and Euro inflationary forces
This is a critical macro event that demands attention in the short-term because it could tip the scale on the inflation/deflation debate to deflation and trigger a deeper equity market correction in the months ahead
You need the real scoop on the macro drivers as opposed to the media headlines ..
That is why you need to …
In the meantime, I’ll give you two critical signposts to monitor for intel on a potential deeper correction.
SPDR Select Sector Fund (Ticker: XLK)
US tech has been driven higher by the reduction in US 10-year interest rates.
So, if we see the Fed continue to ignore inflation and bonds, the reverse trend in tech would follow.
Money Supply versus the S&P 500
If the Fed begins draining liquidity it will cut off a major source of stimulus for the stock market.
Increasing the money supply has been the main driver for stocks for over a decade, and I don’t believe the Fed will be willing to cut-off that lifeline …
However, they have made that mistake before during the Depression and post the 2008 financial crisis, so it is a key signpost to watch for …
Bring It Home
Each week we move closer and closer to an end game that puts in motion a reset of the US economy …
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And as always,
Live and Trade With passion My Friends,