The stock market is currently counting on about 55 more miles of border-wall funding, to put it crudely.
Thatâ??s the
rumored deal on the table right now to avert a shutdown, and one reason for the renewed buying attitude on Wall Street. But given the Oval Office has to stamp its approval on any deal, watch this space and maybe @realDonaldTrump.
Opinion: Why another government shutdown may have little effect on stocks
Politics is one of many market balls that investors are juggling these days. Our
call of the day from Hayman Capital Management founder
Kyle Bass, offers a refreshing top-down view on a lot thatâ??s ailing markets currently â?? but investors should steel themselves for what may be a less-than-bullish outlook from one investing honcho.
â??Markets
will rejoice to the extent we get to a win on a trade deal. Itâ??ll be short lived. My guess is by the end of the year the
U.S. market
will be
lower than it is today,â?*
Bass told
Bloomberg in an interview that aired Monday.
Bass earned his street cred back in 2007 making winning bets on subprime loans and the collapse of the
U.S. housing market, so investors ought to take heed.
In the interview,
Bass doubled down on a
prediction that he made last year that the
U.S. will face recession by 2020, citing headwinds such as global growth. He explains Chinese data, such as industrial production is looking shaky, while Italy entered recession last week and he gives Germany three to six months before its own downturn.
Global growth, in economic surprise terms … US on top, Europe on bottom@Gavekal pic.twitter.com/7EPzRUMEL5
â?? Liz Ann Sonders (@LizAnnSonders) February 12, 2019
Then there are the homegrown problems. â??The
U.S. has this positive stimulus coming from the tax cut that we believe had a $250 billion impact last year, and itâ??ll have a $400 billion positive impact in total this year, but next year it
will only be $150 billion,â?*
Bass says, adding that the deltas, or differences, here are important.
â??The deltas from this year to next is minus $250 [billion] so I think economic activity
will begin to wane in the back half of 2019, and by the middle of 2020 weâ??ll most likely be in recession,â?* he says.
And Democrats are probably not going to â??let Trump stimulate into an election year. Theyâ??re saying behind the scenes that heâ??s taken the economy hostage and theyâ??re going to let him shoot it,â?* he said.
A big problem is that the Fed, whose policy
Bass grades an â??Fâ?* right now, canâ??t help. â??The
U.S. stimulated at full employment with our tax cuts. That stimulus is about to wear off. What I worry about is the last three recessions weâ??ve had in the U.S., weâ??ve cut rates 500 basis points. Now, we can only cut them 225 or 250,â?* he said.
In other words, as he says, â??we donâ??t have the arrows and the quiverâ?* when it comes to Fed ammunition.
Separately,
Bass and Daniel Babich, senior managing director at Hayman, wrote an op-ed
for Bloomberg in which they implore the
U.S. administration not to settle short over China and push for a bigger overhaul over â??bulk economic espionage and theft.â?*
â??Given Decemberâ??s market decline in the equity markets, I think you see President Trump now potentially telling his team to just get a deal done and I think that would be a big mistake,â?* given the work his team has done, says Bass, adding that a deal on trade is just 10% to 20% of the whole argument that includes intellectual property theft, industrial policy, etc.
How to invest against a backdrop of a recession, tangled Congress and hapless Fed? Our chart of the day says no one is easily convinced these days. Read on.
The market
Dow
YMH9, +0.85%
آ*, S&P 500
ESH9, +0.74%
آ*and Nasdaq
NQH9, +0.86%
آ*futures are up as shutdown fears abate. On
Monday, the Dow
DJIA, -0.21%
آ*slipped, but the S&P 500
SPX, +0.07%
آ*and Nasdaq
COMP, +0.13%
inched up. Read more in
Market Snapshot.
Elsewhere, gold
GCJ9, +0.37%
آ*is rising, and crude
CLH9, +2.00%
آ*â?? ahead of an OPEC monthly report. The dollar
DXY, -0.08%
is steady.
Read: Why the dollar is back on the rise despite the Fedâ??s dovish turn
<a href="http://www.marketwatch.com/story/why-the-dollar-is-back-on-the-rise-despite-the-feds-dovish-turn-2019-02-08" class="icon none"/>
And: The Swiss franc suffers a mini â??flash crashâ??: Hereâ??s what happened
Europe
stocks
SXXP, +0.65%
آ*are up and the Nikkei
NIK, +2.61%
آ*led
Asia mostly higher.
The chart
â??My Big Fat Buyersâ?? Strike.â?* Thatâ??s the headline on the Bank of Merrill Lynchâ??s February Fund
manager Survey out Tuesday. While global stock prices are up 7% since January, and commodities 5%, global equity allocations in February hit the lowest levels since September 2016. And the number of managers overweight cash â?? also a bearish sign â?? is the highest since January 2009.
The bank lays out the slump in equity exposure in this
chart of the day:<strong/>
<strong/>Here’s one more that shows how a growing number those striking buyers believe the S&P 500 peaked last year:
The economy
Fed Chairman Jerome Powell
will speak on rural economic policy in Mississippi at 12:45 p.m. Eastern, and weâ??ll also hear from Cleveland and Kansas City Fed Presidents Loretta Mester and Esther George. As for data, a small business confidence index, job openings and household credit data are all on tap.
The buzz
With results late Monday, Aurora Cannabis
ACB, -5.53%
offers a look at the first quarter of Canadaâ??s legal recreational-pot sales. Revenue quadrupled for the company, but it also revealed
large losses and a shrinking margin.
<a href="http://www.marketwatch.com/story/aurora-cannabis-earnings-show-big-growth-in-pot-sales-but-worrisome-profit-trend-2019-02-11" class="icon none"/>U.S. Foods
USFD, +1.79%
Under Armour
UA, +0.58%
آ*and Groupon
GRPN, +4.17%
آ*are reporting results. TripAdvisor
TRIP, +0.57%
Akamai
AKAM, +2.12%
آ*and Activision
ATVI, -7.60%
آ*are due after the close.
First, Amazon
AMZN, +0.18%
آ*buys Eero, next it wants to control your entire house,
says MarketWatchâ??s Therese Poletti.
The newly appointed head of content for WarnerMediaâ??s future streaming service, hints that â??Friendsâ?* and other past studio hits
will live exclusively on AT&Tâ??s
T, +0.54%
آ*
WarnerMediXX and not places like Netflix
NFLX, -0.53%
آ*.
Thereâ??s no big fresh news on the trade front, aside from some upbeat comments
out of Beijing, but things are
fracturing elsewhere after a South Korea lawmaker demanded Japanâ??s emperor apologize over the abuse of wartime â??comfort women.â?*
The stat
40% â?? Thatâ??s how many insect species are dying around the world, with a third endangered, says a new study from the
journal Biological Conservation. With the total number of bugs falling 2.5% annually, the insect apocalypse could be a reality within a century, say stunned researchers.
Random reads
Can Russia survive â??offlineâ?*? Putin
intends to find out
Movie royalties from â??Trading Placesâ?* are
up for auction.
Summer date set for third season of â??Handmaidâ??s Taleâ?*
â??Last Week Tonightâ??sâ?* John Oliver booâ??d over his
2020 presidential prediction.
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