Time to get back to my different portfolios and staying on top of the economic and political situation that can impact the stock markets. Take a look a below headline with a prediction of Morgan Stanley.
Investors are overlooking the threat posed by the U.S.-China trade war, which could send the global economy into recession in less than a year, according to a research note published Sunday by Morgan Stanley.
“Investors are generally of the view that the trade dispute could drag on for longer, but they appear to be overlooking its potential impact on the global macro outlook,” wrote Chetan Ahya, the investment bank’s chief economist. President Donald Trump last month raised the tariffs on $200 billion worth of Chinese goods from 10% to 25%. U.S. officials have also threatened to impose tariffs on $300 billion in remaining Chinese imports.
Ahya noted that the outcome of the trade war at the moment “is highly uncertain” but warned that if the U.S. follows through with 25% tariffs on the additional Chinese imports, “We could end up in a recession in three quarters.” “Is such a prognosis alarmist? We think otherwise,” Ahya wrote.
In particular, investors are not fully appreciating the effect of reduced capital expenditures, which could drive down global demand, according to the bank. An economic slowdown in early 2020 could hamstring Trump’s electoral chances.
Talks between the U.S. and China have stalled as the world’s two largest economies trade rhetorical barbs and punishing tit-for-tat economic measures. The Fed seems to be ready to cut the interest rates again when the economy slows down. That is amazing that central banks are using this weapon so often. Gold’s rally seems to have legs, with $1,350 appearing the next target for believers in the yellow metals amid the cacophony pressuring the Federal Reserve into a rate cut. Gold futures for August delivery, traded on the Comex division of the New York Mercantile Exchange, settled up $6.90, or 0.5%, at $1,343.70 per ounce. It hit a near one week high of $1,345.95 earlier. Some gold pundits think gold could go on to break $1,400 if the Fed issues a dovish policy statement after its June 19 meeting. Spot gold scaled an April 2018 high of $1,348.34 last Friday.
Lower interest rates make safe-haven assets such as gold, which does not yield interest, more attractive while weighing on the dollar. If gold does not lose its momentum, it has a chance of finishing up for a fourth straight week. While the week-to-date gain itself is modest at 0.3%, the yellow metal has advanced 3% so far for June, putting it on to track to its best month since December’s 4.6% gain.
Gold’s rally comes as U.S. inflation growth continues to underperform Fed expectations. The central bank has also come under increased pressured to cut rates after less-than-stellar U.S. jobs data for May. Also President Trump has been criticizing the Fed for raising rates during his term. The president says the Fed’s reduction of its $3.8 trillion asset portfolio has harmed the economy and put the U.S. at a competitive disadvantage.
So we are facing interesting times ahead of us. Personally I think a global recession will come and it will hit hard this time. It is just a matter of time. Be prepared !
Market Sentiment and Sector Watch
The market sentiment gets a hit every time when President Trump starts sending out tweets of new tariff plans. But investors keep on buying the dips. Will we break the new all time highs in coming weeks ? Or in coming months ? We will see what will happen. We can never predict.
Passive Income Update
During the month of May 2019, we received 20,78$ passive income, only dividend income. No options premium.
So let’s review how the options worked out.
Options Trade review
So what happened in May with my puts ? We got assigned another 200 shares JNUG at an average price of 10,5 $.
So we own now 400 shares and the share price is now back on the rise. That’s great. So in June we have 2 more puts that can expire. We will see what will happen. I don’t mind owning 600 shares JNUG at a price of 10,5$. Let it go back to the price of July 2016 …..do the math yourself !
Going forward
So we now have 19% more cash than our yearly objective. If a recession will hit in 2020, gold will be on the rise. Buy when nobody wants it. I have patience and this is a long term portfolio. We will review after the june expiry date whether we add more puts or do some covered calls. Read our next month update.
Let’s grow the money in our kids pockets.
This is the end of our blogpost. Did you realize more than 1000$ for your kids in 5 months ? No ? Then you should start investing in your own knowledge. Putting your money on a savings account is not a strategy to grow your kids money.
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