India-China standoff; Stocks move lower
Abraham George Macro View
Skirmishes between China and India at a height of 17,000 high has left troops dead on both sides of the border. With both sides trying to keep gunfire to the minimum within the 1.25 miles of the “line of control”, they sorted to some medieval tactics. An Indian military officer claimed, “They hit our boys on the head with metal batons wrapped in barbed wire”. Pretty savage and brutal.
The history books can still claim that no gun shots were fired for troops to die at the border since 1975. This may not be the beginning of World War 3 but there could be big back lash from India in terms of boycotting Chinese goods and freezing any trade relationships. The Chinese already have big investments in Indian startups and other collaborations.
As the economies are opening up, many US States are reporting record rises in COVID-19 infections. Hospitalizations surged by 11% in Texas in 24 hours. Not to mention the wave of new infections in Beijing, China.
Many medical pundits including Dr. Anthony Fauci has been also warning about the “second coming” probably in winter. As with other “second comings”, we don’t know the time when and where it will show up in a big way.
The good news is that Fed Chairman Powell has reassured us again that the Fed will cover us. The Fed is there to backstop investors. To that end, the White House announced that it is preparing a trillion-dollar infrastructure spending package.
The majority of the funds are likely to be earmarked for traditional infrastructure like roads, bridges etc and even building 5G wireless technology. This is not anything new. Even before President Trump took office, he was talking about spending on infrastructure. With all the spending the Fed and Congress has undertaken, it will be interesting to see how this will get passed through Congress.
Investors around the world have found immunity from the avalanche in the broader markets by focusing on tech stocks. Social distancing and self-quarantine have showed us that tech delivery services like streaming videos and internet deliveries are now routine part of our daily lives.
At the beginning of the pandemic, we had recommended four stocks to be invested in namely Amazon, Facebook, Salesforce, and DocuSign. The last time I looked at them, they are all doing extremely well.
EQUITIES
Despite all the reassurances from Chairman Powell and the announcement by White House on infrastructure spending, stocks moved lower by the end of the day. Yesterday, two stocks closed lower for every stock that closed higher on the NYSE.
The indices are following a pattern of subdivisions but when it will breakdown, the move will be strong and severe. The June 16 low at 3076 in the S&P 500 will be something to watch.
If you enjoy reading Breezy Briefings, please share across social media and tell your friends about it.
BONDS
Bonds are again in consolidation after the sharp move down a few weeks back. The pressure should be building up for further falls and the critical level to break will be 170^30 the June 5 low.
EURO
The decline from 1.1423 on Jun 10 has impulsive characteristics. Think any up move should be capped under 1.1355.
GOLD
There is nothing further to add to our gold outlook from previous reports.
Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.