Trade tensions remained the front and center focus of the market’s attention last week. Stocks had their worst day of the year Monday after China announced retaliatory tariffs of an additional $60 billion of U.S. goods. President Trump eased investors’ tension describing the latest disagreement between the world’s largest economies as “a little squabble” and added hopeful remarks that he expects a fruitful meeting with President Xi at the upcoming G20 summit. The market rallied through the remainder of last week erasing most of Monday’s sharp losses.
Progress toward ratifying the United States-Mexico-Canada Agreement (USMCA), the agreement that is replacing NAFTA, helped support stock prices. A deal has been reached for the U.S. to lift steel and aluminum tariffs on Canada and Mexico. The countries will drop all pending litigation related to the tariffs, set up a measure to “prevent the importation of aluminum or steel that is unfairly subsidized and/or sold at dumped prices,” “prevent the transshipment of aluminum and steel made outside of Canada or the United States to the other country,” and agree upon a process for monitoring aluminum and steel trade between the three countries.
Bitcoin has been finding its way back onto the radar of mainstream media as prices have rallied over 100% year-to-date. The rally has prompted JPMorgan’s analysts to release a warning, “Over the past few days, the actual price has moved sharply over marginal cost. The divergence between actual and intrinsic values carries some echoes of the spike higher in late 2017, and at the time, this divergence was resolved mostly by a reduction in actual prices.” Bitcoin enthusiasts assert the latest JPMorgan warning is just fear mongering by the Wall Street behemoth. It was just earlier this year that JP Morgan’s analysts were discussing a $1,260 price target warning the 73% price drop that occurred through 2018 would continue into 2019. And while so far it hasn’t continued, the year is still early. Prices in cryptocurrencies tend to move very dramatically and very quickly. Over the weekend, Bitcoin prices touched $8,000 before pulling back to below $7,800 Monday morning, after starting the year at $3,750.
Author: Jim Rambo, CFA | Research Team | Allegheny Financial Group | May 2019
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