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Fred Dunkley

Fred Dunkley

Writer, Safehaven.com

Fred Dunkley is a tech analyst, writer, and seasoned investor. Fred has years of experience covering global markets and geopolitics. 

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Trump Lashes Out As Stocks Slip

Trump

Democrats took control of the House of Representatives last week, and their first order of business is purportedly to take down the stock market by way of harassing the president.

On Monday, Trump took to the Twittersphere with this message:

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The Tweet comes after a bad opening for markets this morning, with U.S. stocks sliding, dragged down by the tech industry.

The Dow had lost nearly 410 points by noon EST …

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While the S&P 500 had lost nearly 40 points:

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The biggest drag on the markets has been Apple, which lost over 4.2 percent by midday, taking a beating after one of its facial recognition suppliers cut its outlook over slowing iPhone demand.

The supplier, Lumentum, said in a statement that it had recently received a request from one of its “largest industrial and consumer customers” to “materially reduce shipments” of laser diodes for 3D sensing during the fiscal second quarter for “previously placed orders that were originally scheduled for delivery during the quarter”.

From this perspective, it’s pure fundamentals, and not politics, or even a trade war, that’s weighing on markets.

But from a broader perspective, there are plenty of things weighing on markets right now—and none is a Democrat. Related: Why Is Wall Street Giving Dating Apps The Cold Shoulder?

The biggest weight on markets is the impact of warring tariffs and the specter of a continued trade war that threatens a global growth slowdown. A strengthening U.S. dollar has also taken a bit of a bite out of stocks recently, hitting a 16-month high today and adding pressure to companies doing big business overseas.

Certainly, the October correction that has spooked investors had nothing to do with Democrats in the House.

And the markets are likely to get spooked again before the year is over, according to Federated Investors' Steve Chiavarone, speaking to CNBC.

And the events to look out for aren’t Democratic efforts to confront Trump, rather, the December 1 meeting on trade between Trump and Chinese President Xi Jinping, and the next meeting of the Federal Reserve, according to Chiavarone. 

But the October correction and what comes next can’t be blamed on politics alone—or even geopolitics. U.S. markets are grappling with a fundamental problem: High-flying tech stocks that are supremely overvalued are now being called on to pay the piper, so to speak.

Morgan Stanley is one of the biggest believers in this theory, and its analysts have been warning investors that FANG may have lost its lure, and big money may start moving back into value stocks.

The market, says JPMorgan, is reaching a “tipping point” for regime change that could see growth stocks—like the explosive tech offerings—give way in a new cycle to less riskier value stocks.

That doesn’t mean the Democrats in the House don’t have the ability to roil markets beyond what fundamentals and a trade war are already doing.

What Trump is referring to is the Democrats’ plan to shower him with subpoenas that threaten to open up every aspect of his life and family business dealings. It’s a battle that intends to test the power of the presidency, Congress and the Supreme Court, according to Axios.

For the present, though, look to pure fundamentals and what comes next in the U.S.-China trade war, the sanctions game with Iran and a Federal Reserve that Trump says has “gone crazy”.

By Fred Dunkley for Safehaven.com

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