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I’m beginning to think that the trajectory of the U.S. stock market could easily be a daily TV soap opera. Let’s call it “As the Trade Talks Turn,” starring the voluble and mercurial President Donald Trump and his straight man, the reserved and conservative Chinese President Xi Jinping, with a regular cameo by the stock market. In any event, there is a “yuge” and willing audience of traders and investors who tune in every day, mostly to the nearly hourly tweets from Trump. It is entertaining, though I’m aware that some investors are sweating bullets, or worse, losing money. In the ongoing on again, off again trade talks between the U.S. and China, the negotiations are back on again—cue the market rally. Talks are scheduled to resume in October in Washington, D.C. For more on this, see page 10. To some extent the jobs data out Friday was welcomed by investors, too, and was a boost to stock prices. (More on this below.) The stock market duly recovered on the news of the resuming talks, out Thursday. Indeed, global stocks joined in the fun, as well. The Standard & Poor’s 500 index rose about 2% to 2979. Similarly, the MSCI ACWI (MXWD) world index of both developed and emerging market stock markets also soared 2% last week. And guess what, the SPX is just a couple odd percentage points below the all-time high, set in July, but you’d never know it from the headlines. It certainly looks like the American equities market is a resilient one. Bears just keep hurling terrible things at it—whether inverted yield curves or weak economic data—but stocks are holding their own. And the rise of the last two weeks out of an August trading range could portend a breakout and a good fourth quarter. That’s what my colleague Tom Lee says and you find out more on page 3. And here’s another important factor that many bears gloss over: the advance/decline line just doesn’t quit. Last week, it made a new high, and peaks in this measure typically have preceded peaks in the big-cap averages by four-to-six months. The new A/D index high has come against the backdrop of a 3% correction in the S&P 500 index, something that has happened 19 other times since 1950, according to SentimenTrader. com. Of those times, the market was higher 17 times two months later, and the two misses were minor, according to a recent Wellington Shields report pointed out, I hate to resurrect the Goldilocks theme, or economic numbers that are running neither too hot nor too cold, but that’s where we’re at right now. I point to the jobs data out Friday, which perhaps in most other markets might have been seen as disappointing but in one craving and expecting the Federal Reserve Board to lower rates, the numbers were just right. In August, U.S. payrolls grew by ed 130,000, the Labor Department reported Friday, down from an average 190,000 a month in the last eight years. The unemployment rate was flat 3.7%, near a 50-year low. While markets dipped initially after the data was released, investors saw the numbers as confirming the expectation of a Fed funds rate cut in less than two weeks. For more on this see page 6. Separately, in a speech in Zurich Friday, Federal Reserve Board Chairman Jerome Powell noted that the U.S.-China trade tension is weighing on investment decisions. “Uncertainty around trade policy is causing some companies to hold back now on investment,” he said. For once, stocks effectively ignored the comments by the top central banker Friday, as there was nothing said that was unexpected. Powell added that lower rates are helping to keep the U.S. economy in a good place. And he said he doesn’t expect the U.S. economy to fall into a recession. Well, golly, that’s what we’ve been saying all along. Nice to see the chairman of such an august institution agrees with us. Quote of the Week: From the BBC website: Two newborn panda cubs at Berlin Zoo have been unexpectedly caught up in Hong Kong’s political unrest, after German newspapers started a campaign to name them “Hong” and “Kong”. The pair were born on Saturday evening to Meng Meng – a panda on loan from China. One of Berlin’s leading papers, Der Tagesspiegel, asked its readers to come up with name suggestions. Top of the poll: “Hong” and “Kong”. One reader wrote in to say they should be named “in solidarity with a city fighting for survival.” Looking Questions? Contact Vito J. acanelli at vito. racanelli@fsinsight. com or 212 293 7137. Or go to

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