The First Crack in the Bull Market: Emerging Markets

After another positive week for equities, John recaps the winners and losers, from telecom, energy, tech, and industrials’ strength to the surprising weakness of big banks, thanks to a spike in the 10-year Treasury yield, and a last week that sent some of their investors running for the hills.
Of course, what really drove markets this week were tariffs – specifically, the 10% tariffs on $200 billion worth of Chinese goods. Scott and John discuss the newest headlines from the U.S. – China trade spat, and they explain why the most recent round of tariffs is still far from the worst case scenario.
Scott points to a surprising fig leaf is the multi-billion tariff broadside that leaves “this window open for the potential to negotiate. People are looking at this as a conciliatory gesture – we’ll see.”
Meanwhile, John notes how Apple seems to be getting a break – “nothing like dinner with the President at his golf club to make things a little easier on your company” – as Scott breaks down their latest promise to do their part in Trump’s trade war.
Fresh from watching the Chinese stock market overnight, Greg tells listeners why he sees a possible bottom in Chinese stocks, and why Chinese stocks are a reverse kind of “buy the rumor, sell the news” group.
The hosts shift over to emerging markets, and Scott and John discuss how strong economic data in the U.S. could affect upcoming emerging market policy decisions. After breaking down the dollar’s near-1% dip last week before its Friday rally, he turns to looming numbers coming out of South Africa and Brazil.
Scott brings up the Fed’s role in the emerging market chaos and explains how the Fed’s goal for “neutral rates” will affect emerging markets going forward.
Greg says that every quantitative tightening cycle (raising rates) has ended in a recession and says that the emerging market selloff could be the first crack in the next recession.
Greg then discusses market technical, and he explains that “we are not out of the woods yet,” and markets could head lower. He also notes how the markets have a similar setup to the 2000 tech bubble.
There’s “one thing that keeps me up at night,” however, and it’s not valuations or a lurking corporate bond crisis. If this sector that’s fueling America’s tech boom slows down, it’s highly unlikely the broader market, and the rest of the world, can shrug it off.
He names three stocks he’s watching at the moment in the industry. One of them, you’ll recognize immediately as a non-FAANG media darling – the other two, not so much.
The talk then turns to Jamie Dimon’s inexplicable comments on his own viability as a 2020 presidential candidate, and the biggest reason he had to walk his remarks back right away.