I guess the key question is whether we will see a more challenging 2nd half this year e.g a modest correction or a similar one as large as the one end of last year. We may not know even judging from the next few trading sessions because we cannot anticipate the outcome of the trade dispute and unintended consequences that is probably in the works. Mike Pompeo visit to Australia wasnt helpful in trying to shore up support from Australia against China but it is good we have managed to navigate a right balance (so far) : our iron ore is our main export and 80% of it goes to China and Australia is blessed that Brazil had supply problems. It is a shame to see Geopolitics and Economics are so intertwined now with significant ramifications.
For me it is 60:40 on the downside but I will be more concern for those with overexposure to equities. Market technicals that start turning down usually represent a start of a new trend (as you can observe in the 3 phases I outlined in my earlier post). If resource stocks will fall and banking stocks likewise (given that rate cuts are bad for bank margins, the last cut shaved 4 basis points off CBA margin which equates to $300m and there's more rate cuts to come) both making up a large proportion of the ASX, how would the ASX able to get higher? Thirdly, as I mentioned, a gold rally is not good for the equity market and I expect to see gold making a rise up (cup and saucer formation) to possibly even US$1900.
But on the positive side, if POTUS decides to unwind and change his course of action and resolve the trade dispute amicably, then of course the markets will jump and the rally resume - but will he? Peter Navarro , a China hawk in Trump administration admonish drastic action against China, upping the rhetoric , should China devalues its yuan. POTUS hates to lose and back down and it is difficult to see him do that. While all that POTUS does may well drive the Fed to cut rates more and faster, in the face of economic uncertainties generated in the process, the rate cuts themselves may no longer be as potent for economic recovery [ just as I mentioned, Australia tax cuts and rate cuts may not fuel more spending as it is hoped because people no longer feel secure for their future and their jobs ]. A struggling global economy does not need to be further hamstrung by failed politicians [to break the camel's back]-If indeed this develops into a recession as is now feared, POTUS this is a recession we didn't need to have!
There is a lot of resource that I have posted in this thread if you can go back in history, the underlying root problem is there all along...it is a question of when.
