Home News Don’t Be Fooled. This Dow Jones Bounce Is Nothing but a Head Fake

Don’t Be Fooled. This Dow Jones Bounce Is Nothing but a Head Fake

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By CCN Markets: News that Donald Trump would delay the imposition of tariffs on some Chinese items despatched the Dow Jones rocketing in the present day. Beware, although, as a result of it is a head pretend earlier than the inevitable crash.

The Dow Jones Industrial Average rose 372 factors to 26,280, a rise of 1.44 % on Tuesday. That’s as a result of Donald Trump and the Treasury Department introduced that extra tariffs on laptops, cell telephones, video games, and sure varieties of toys and attire is not going to be instituted till Dec. 15.

Dec. 15 is essential as a result of it is going to be after most Americans full their massive vacation procuring.

This doesn’t imply that the stock market or the Dow Jones are going to proceed to rally. In reality, that is simply one other steadiness in a lengthy collection of bounces and declines triggered by commerce information.

The Dow Jones and the inventory market are extremely topic to the emotional whims of traders. No different piece of stories prior to now yr has moved the Dow Jones or the stock market as much as anything having to do with the trade war with China.

Investors appear to consider that the continuing commerce battle is mostly a unhealthy factor for the American financial system and that company earnings might be negatively affected as a consequence. That could also be true within the brief time period, but over the long run, the commerce battle will merely be a blip on the radar.

Investors are inclined to lose sight of the long run with regards to market-moving information like this.

Ed Butowsky, Managing Partner of Chapwood Capital Investment Management, tells CCN:

“Trump’s trade war strategy is brilliant. While the American economy has improved under him, it remains weak in many areas, as we see from declining corporate earnings. He is using the trade war to make hay. There’s no real downside to this strategy, and it may result in a significant difference in America’s trade deficit.”

CNBC’s Jim Cramer agrees:

Butowsky preaches warning.

“The stock market remains at an extremely high historical valuation, almost double the long-term average. You must be cautious.”

The Dow Jones index continues to replicate a very optimistic view of the financial system and company earnings within the close to time period.

Shiller P/E Ratio | Source: multpl.com

As the Shiller P/E Ratio chart exhibits, the inventory market is insanely costly and a 50% crash seems inevitable.

This article is protected by copyright legal guidelines and is owned by CCN Markets.

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