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Trade Wars Eve

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On the eve of a trade war with China the major averages enter the final hour with modest gains on generally positive economic data. The Chinese have of course promised to retaliate, but not make the first move. Trump is on record for stating that if the Chinese retaliate, he of course will retaliate as well. I believe it was Gandhi who said that “an eye for an eye, makes the whole world go blind”.

Recent rate hikes and other factors continue to narrow interest rate spreads putting the yield curve painfully close to inverting. As it has reached it flattest point since July of 2007 just prior to the previous crisis. In fact one more .25% hike would probably do the trick at this juncture.

The Institute of Supply Managers or ISM non-manufacturing or services index gained .5 points in June to 59.1. Despite a decline in employment, price data fell notably, but remains high at 60.7

The ADP Employment report gained a below consensus 177,000 new jobs in June. Missing expectations for a 4th consecutive month and also a 4th consecutive sub 200,000 print. The official employment report is due tomorrow and is expected to show an ok 190,000 new jobs.

This is Caleb Lawrence Registered Investment Adviser Scotts Valley Drive and Willis Road in the Scotts Valley Plaza, Suite 202 or call me toll free at 888-RICH PIG / 888-742-4744.

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