A battered planet is battening down the hatches, and that’s likely a bad sign for stocks, according to one veteran Wall Street strategist.
Byron Wien is worried that an “inward shift” — a growing tendency to shut out the wider world — could sap interest away from riskier assets such as stocks.
The rise in tariffs and other trade-war fears figure prominently in Byron Wien’s jeremiad, of course.
But Wien, who delivers our call of the day, also is concerned about the U.S. ditching major alliances that deal with security and the environment.
What’s more, it’s troubling that companies are choosing to remain private, rather than sharing their growth with investors, says the vice chairman for Blackstone’s private wealth solutions group.
“All of these examples contribute to the theme that the world is becoming a place where inward thinking is on the rise,” he writes.
“While this may result in favorable quarterly earnings comparisons and temporary solutions to geopolitical problems, the long-term implications of inward thinking may be more problematic.”
The Blackstone strategist even sees trouble for investors in President Donald Trump’s decision to pick Brett Kavanaugh to replace the retiring Anthony Kennedy on the Supreme Court.
That “could represent another move toward inward thinking,” given that Kennedy “was the unpredictable ‘swing voter’ and his replacement by an avowed conservative could tilt the balance toward a more rigid, ideological point of view,” writes Wien, who generally has sounded bullish in recent months.
“If Americans believe the court is doctrinaire, their confidence in a critical institution will be diminished,” he says. “Many are already suspicious that universities are too liberal and the press has permitted its ideological orientation to creep into its reporting.”
That point about academics and the media is hardly a new one, but Wien is emphasizing that feelings along these lines don’t stoke buying appetite.
“The alienation of people from these institutions reduces optimism about the future and adds to investor uncertainty. It creates a state of melancholy which is not conducive to risk-taking,” he says.
Key market gauges
Futures for the Dow YMU8, +0.02% and S&P 500 ESU8, -0.06% are trading lower, but those for the tech-laden Nasdaq-100 NQU8, -0.02% are rising, helped by Microsoft’s earnings-driven premarket gain.
The Dow DJIA, -0.03% , S&P SPX, -0.09% and Nasdaq Composite COMP, -0.07% closed with losses yesterday. The three gauges are unchanged to slightly higher for the week, as of Thursday’s close.
It has been mostly losses for European stocks SXXP, -0.15% , after Asian markets finished mixed. Oil CLQ8, +1.22% and gold GCQ8, +0.65% are higher, as the dollar index DXY, -0.72% falls. Bitcoin BTCUSD, -1.00% is trading near $7,500.
The chart
China today weakened the yuan CNYUSD, +0.0473% by the most in two years. The move came just hours after Trump called out the currency’s slide yesterday, saying it’s “dropping like a rock” and putting the U.S. “at a disadvantage.”
However, the PBOC’s move appeared to track market action, a Wall Street Journal report noted. The fix followed a 0.9% drop in the currency’s value onshore, to a one-year low. And the yuan USDCNY, -0.0472% then bounced back as Asia’s trading day progressed.
Meanwhile, the president has sounded a similar note today, tweeting that “China, the European Union and others have been manipulating their currencies and interest rates lower.” He also told CNBC that he’s ready to put tariffs on every Chinese good imported to the U.S.
“It’s just a lot of fun, normally. It’s nothing like this. And with them going out in the storm, I don’t necessarily know what that’s about, because it’s not like we didn’t know about this storm.” — Becca Blackstone, a manager of an Irish pub in Branson, Mo., reacts to yesterday evening’s fatal accident involving a duck boat on Table Rock Lake.
At least 11 people are dead after the amphibious tourist boat capsized during a heavy storm that hit the lake in southwestern Missouri.
The buzz
Beleaguered florist FTD FTD, -19.47% said late yesterday that its CEO, COO and CMO are out, and it’s restructuring and reviewing strategic alternatives.
Amy Powell, the president of Viacom’s VIAB, -1.82% Paramount Television unit, has been fired after she made remarks on a conference call about black women being angry and about black children being raised by a single parent, according to a Wall Street Journal report. She says there is “no truth to the allegation that I made insensitive comments.”
Facebook FB, +0.89% is in the headlines because its WhatsApp business announced curbs on its service in India in an effort to stop a spate of lynchings — and because Mark Zuckerberg reportedly congratulated Trump on his 2016 election win.
“When companies become verbs, nouns … that’s usually a pretty good time to invest in the stock,” says Wall Street analyst Mark Mahaney.
Other earnings winners besides Microsoft MSFT, +1.79% : Capital One COF, +1.95% , Skyworks SWKS, -5.36% and Intuitive Surgical ISRG, -0.87% look on track for gains after their earnings beats late yesterday.
Skechers SKX, -20.99% , on the other hand, appears set for a plunge after its results and outlook disappointed.
GE GE, -4.44% , Honeywell HON, +3.79% , GE-owned Baker Hughes BHGE, +0.69% and Schlumberger SLB, -1.24% are among the companies that posted earnings before the opening bell.
The economy
There are no top-tier U.S. economic reports on tap today, but the St. Louis Fed’s James Bullard gave a speech ahead of the open in Kentucky, warning that “imminent yield curve inversion in the U.S. has become a real possibility.” Every recession since World War II has been preceded by an inverted curve.