USA Withdraws from Paris Accord, and Markets Hit Fresh Highs
Last Week Review
The stock market started the week flat, with a very low volume and uneventful Monday. From there, equity markets sold off Tuesday and Wednesday, hitting a low of 2.403.2 on the SP500 index at around 10AM on May 31st.
Equities quickly recovered from the loss on Wednesday and managed to close flat for the day.
On Thursday morning at 8:30AM, we saw a very strong ADP private jobs number. This report is highly scrutinized as it is used to get a gauge of what the more important Non Farm Payrolls number will be the following day.
The market expected 181,000 jobs added but the ADP actual came in at well over 250,000, smashing even the most bullish predictions. Equities rallied to new highs by the close, gaining a total of over 15 points.
Friday morning was all about the most important economic release of the month…non-farm payrolls. Expectations were for 181,000 jobs as well. At 8:30AM the market got a very bearish 138,000 jobs last month, especially negative considering the ADP number blew expectations away just the previous day.
So markets sold off. Wait, no they didn’t.
Markets promptly shrugged off the terrible jobs data and instead climbed to new all time highs, and closed within 4 points of the daily high.
Towards the close of trading for the week, Donald Trump withdrew from the Paris Accord, and after a brief drop the market recovered.
It seems good news is good news and bad news is also good news. The equity market is marching to it’s own beat, and has been disconnected from economic reality since 2009. It seems to continue to worsen, and we can only say that it will not end well. The economic collapse draws nearer the longer the disconnect stays in tact.
But for now, the bulls are enjoying the party.
USA Withdraws from Paris Accord – What the Accord Is and Why it is NOT a Game Changer
The Paris Accord is a voluntary agreement, totaling over 195 countries. The United Stated withdrawing becomes only the 3rd country, along with Nicaragua and Syria.
Syria did not participate as they are using all their resources trying to overcome years of war and hardship.
Nicaragua has already decreased their emissions more than any of the 195 active countries in the Accord. In fact, the only reason Nicaragua is not in the Paris Accord is because they do not think it does enough to address the problem.
The Paris Accord aims to limit weather increase to just 2%, a number which is believed to contain the global warming problem. This is very controversial however, as some scientists have said that the damage is irreversible at this point.
The truth is, no one knows when it’s too late or what is required. The only thing scientists agree on is that drastic action is needed asap.
Under Trump’s administration policies, the expected temperature increase is over 3.8%, a number that would cause significant damage.
However, the Paris Accord was completely voluntary and aimed to help poorer countries deal with the costs of reducing their emissions and carbon footprint. The ironic part is that none of the developed nations followed similar rules.
Look at the oil boom starting in Titusville, and the staggering amount of control and fortune a small group of people have collected because of the dirty production of oil.
While I think we need an international agreement on climate change to really solve the problem, Trump is right in a sense that the Paris Accord is not the right solution. It does not do enough. It is a vague, non-binding agreement used as a tool to say, “see we are trying to do something about climate change”.
Understandably the nation is panicking because they are interpreting this as America does not care about the climate. This is not an accurate conclusion however.
There is an opportunity for the United States to now lay out a new plan that will actually make a real difference and commit to it’s roll out.
But with the vast majority of global wealth being tied to the extraction, production and refining of oil, there is very little chance that happens.
Especially since this same money has their tentacles all over the government branches.
Weekly Stock Market Update – Sector Overview
This week we can see that the majority of stock market gains came from the utilities and technology sector, which is uncharacteristic of a bullish trend.
Typically financials and energy lead rallies.
Here is the total tally for sectors this past week.
- Utilities are up 1.7%
- Technology is up 1.4%
- Financials were down 0.7%
- Energy sector was the worst, down 2.2%
Weekly Stock Market Update – What to Watch This Week
James Comey, former FBI director is expected to testify before congress this Thursday on Russian and Donald Trump collusion to interfere with US elections.
This event will be watched closely, with any ques that there was collusion being very bearish for a market that sits on new highs and low volume. Traders know that it is a lot easier to accumulate a massive long position then it is to dump one. That’s also why stocks go up slower then they drop.
This week has fewer high impact news items, so the market will need to gather some steam to continue higher, or we are likely to pull back for a retracement.
The Federal Reserve Meeting is Coming!
The June 14th Fed meeting is the most important one since 2009!
We will find out how the Fed plans to unwind their massive 4.5T balance sheet. The market will be very volatile and there will be a lot of trading opportunity to make great money.
Join us next Sunday June 11th for complete analysis and the trading plan.
Subscribe to any of our packages and you can join this very important webinar. Don’t miss it.
Have an awesome trading week.
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