Geo-political tensions are flaring in Asia today as the US ratchets up its sanctions against China. To a degree verging on all out economic war. Yet, at the same time championing the idea that it does not want to decouple from China.
Mixed signals from Washington, as China responds to Taiwan’s President’s meeting with Senator McCarthy, by announcing several major military exercises in the region over coming days. While the US and the Philippines plan major military drills for next week.
This heightened military posturing of both sides, quite significant in nature, occurring as diplomacy takes a further nose dive on sanction announcements is a very dangerous cocktail indeed. The risk is always an accidental military exchange between these opposing forces. The climate in the region is quite heated now.
Stocks in the US are clearly tiring as outlined earlier this week, and the bearish price action on the day in New York most certainly left the market vulnerable to further declines through Asia. These rising geo-political tensions will do nothing to help market sentiment on the day.
Adding to the growing feeling that selling US assets of various kinds may remain a good idea, US Existing Home Sales fell a further 2.4% last month, Simultaneously the commercial property crisis is becoming entrenched as cities continue to be hollowed out by changes in work practices, lay-offs, and rising crime levels. US car repossessions just hit a new high beyond levels seen in the GFC. Bond markets are also remaining heavy even as some hope for a Federal Reserve pivot.
Clearly, the fundamental economic matrix of the US is a nightmare at the moment.
President Biden believes the US economy is strong, and a beacon to the world? Which means there will be little suitable policy in place for the growing edge of the abyss economic scenario now immediately confronting the US.
President Biden is expected to officially announce his candidacy re-election next week. It is likely this will only cement the likelihood and forecast here that former President Trump will win the next election regardless of indictments.
The increasing probability of a Trump victory, his polling went up after he was indicted, will be of concern to many, but there are potential economic positives too. We will have to see the clear policy suggestions closer to the election.
Today, investors are likely to be re-assessing whether the strong bull market over recent months may indeed be running out of steam.
Market insights and analysis from Clifford Bennett, Chief Economist at ACY Securities
