The Final Showdown

We have seen further US China trade comments from both sides, Europe as well, and then some back tracking too. Kind of like probing enemy lines, to see if they give anything away.

In the end though, it is likely to be the more mundane outcome which triumphs. For instance, many thought Elon Musk’s Model 3 would be a failure, but there it is, coming off the production line in the thousands just as targeted. In a similar manner, trade between the USand China, and the US and Europe, is likely to continue.

Heightened trade tensions have already had an impact, but it has very much been at the margin and not at all the main game. This is why were main so resolutely of the view that quite possibly your biggest risk is that you miss out. It is still a grand bull market after-all.

 

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It is never easy to do well, live fully, and find that sweet spot in market trading and investing that is our own unique swing. Yet, it can and does happen at times.

Over the past week we have continued to be tested, as the media relentlessly highlights those who are warning of such things as a global recession due to trade wars? It really is the same old re-run pattern of an approaching market collapse via the media, which will end in the more true and real fundamentals of strong global growth and expanding corporate profits driving markets to new highs. Not to mention broadening wealth, and true aspirational opportunity such as the world has ever seen.

US GDP revised to an annualised 2.0% in Q1, from 2.2% earlier estimate.

US Q1 GDP was revised lower from 2.2% to 2.0%, but we have to put this in the context of the first quarter always being a low number,and then followed by much higher numbers through the rest of the year. This is the economic pattern of the US.

So a 2% base for upward acceleration, is a very nice place to be indeed. You see, the last three Q1 GDPs for the USA were, 0.6%,1.2% and now 2.0%. This is a very powerful overall trend that is much bigger than any one quarter result.

Each of the previous two years accelerated to outcomes of 2.8% and3.2% respectively. Very strong indeed for the world’s largest economy! If the pattern holds, we may well see 3.6%, or higher, this year. This is a time to be buying stocks.

Wait, there’s more!

US Corporate Profits were revised higher!
Corporate profits in the United States increased by USD 153.0 billion, or 8.7%, to an all-time high of USD 1,920.0 billion in the first quarter of 2018.

This was at a time when the stock market was crashing, because the ten year bond yield was approaching 3%? We said at the time this was an absolute nonsense as a reason to sell stocks, but markets will be markets. The mainstream is always looking for the downside, but the US and global economies remain gripped in the greatest period of prosperity ever seen.

We may will be proven right on the fundamentals, but that doesn’t mean we will make money. Having a “view” and “trading” are two distinct art-forms.

A lot of people say they liked a stock or market when it was lower, and look where it is now. As our recent reports and trades would show you however, we actually manage the positions through real market conditions into something special. Something real.

As you know, and are all well aware of, there are risks too. That’s the thing isn’t it. We are willing to take risks to participate and aim to achieve more. More in fact than others. It is not just competition however, it is really about what we personally can learn about ourselves, about markets, and out of that, what we can become. This includes the bottom line, but the opportunities reach far beyond.

Would you believe.

Markets moved a little against us on the first day of this week, but their entire behaviour confirms to me that they are shaping up for a final showdown. One, which may have just quietly already occurred in fact. The last gasp of the false priests of exaggerated trade wars and other fears. While it may feel a little difficult just here, the reality is a lot brighter in the real world, than it at first glance may appear.

What I would like to highlight, as a market behaviour shift, is that actual stock prices are increasingly energetic in bouncing back against the fearful headlines. This is where, from places like this, bearish headlines and increasingly resilient prices, that big moves emerge.

STOCK SPOTLIGHT
The news of the moment, is Tesla.

The initial response has been to fade the news of the Model 3 achieving production targets. A lot of people took profits on the day, as the reasonable expectation of quite good production numbers for the Model 3 was achieved. It is also the case, that some people sold and went short on the basis that they either refuse to believe those production numbers will be maintained, or, that all the good news is now priced in.

We again think the overall market is missing the point. This is a state of the art first mover product that is reaching true industrial output levels, with a growing brand awareness and recognition globally.

Given all the negative analysis on this stock, much of it short-sighted and focused on the existing three month financials, the fact that this company has the potential to achieve a degree of global dominance in its market niche, is something well worth investing in for perhaps the next decade or two. Certainly for the next year or three. We have the prefect opportunity here, of a skeptical investment community missing the point that long term deliverability is being proven.

We see significant opportunity for this stock to move to all time highs very quickly, and to keep going. Right now, the immediate fade the news approach of most traders, has created short term opportunity as well.

Regards,
Clifford Bennett