Mr Trump’s twitter account is beginning to resemble an old school US B-52 bomber dropping napalm like tweets into the market without much concern for the carnage that follows. Markets were enjoying a nice millpond period ahead of what should have been heathly China trade talks. But as mentioned a week or more ago, the Algo’s and Bots prefer volatility which is why ‘events’ like those seen over the last few days occur. The connection between politics and markets has been there for decades. But never before has a US president tweeted with clear intentions to move prices. A couple of weeks ago, Trump was at it again with OPEC. Prices were $75pb (Brent) and doing fine based on market metrics and then comes along a strawberry blonde B-52 style tweet and Oil was down to support levels in days. It’s becoming something that is fairly easy to predict. The difficulty is guessing when. All this does is incentivise short term trading rather then longer term investing. Investors are hopping around, fearful of the next killer tweet. Positions are closed going into weekends which is probably why there is a clear trend of late (particularly on commodities) of seeing prices rise strongly on a Friday afternoon or the opposite and collapsing. Whether driven higher by shorts closing or lower by longs closing or shorts opening, the market is beginning to resemble a 4 day trading week. It’s good for trading houses and brokers which all ‘need’ volume and activity to thrive. What the market (brokers) don’t like are the investors that buy and hold. Which is probably why many brokers now penalise such investors through higher fees and reward the more frequent gambling style traders with free trades when going over a certain volume of transactions. It’s not good and it’s creating an equity trading backdrop which feels like it is going no where fast despite good news flowing from many stocks. Frustrating for the ‘value-hunting’ investors who seek cheap stocks and expect them to rise once the good news flows, only to see them choked at every corner by short term traders. There’s no doubt about it, it’s tough out there at present and with US president ‘tweeting’ without restraint, it’s likely to continue for sometime.
Week 18 Review:
Not a good week for commodity focused stocks. That said, TheShareHUB picks underperformed due to dilutive funding rounds with SXX and some poor performances from HUM, AMER and CERP. The best recovery stock for the week was PDL which has recovered well after Blackrock’s hefty selling period ended but is still off by -40% for the year. The top picks need some good news to get back into positive ground and with the drilling season fast approaching, some much needed catalysts are not far away now. The Independent continues to perform well and the Guardian picks are still in the mix. Long way to go.