So a number of developments have been occuring this last while and making sense of them can sometimes seem like a huge undertaking. Here I will attempt to explain what’s going in and how I see the world this week.
First off and an important development, is China selling off US treasury bonds. This is hard to really gauge but apparently China has opted to sell 15 year treasury bonds, some may say in retaliation for the tariffs imposed on China with the escalating trade war. Some may say this is significant, however selling the bonds means that there’s ultimately a buyer and this translates to the bonds changing hands and China taking a hit for selling before the bonds had matured.
What’s even more worrisome however, is that China hold close to one trillion in bonds and if the trade war escalates further, this could have more bonds flooding the market, and this as America is at a staggering 21 trillion in debt, may have market implications. Too much of anything flooding a market can have very real effects in the model of supply and demand which dictates the more supply and less demand the less the bonds would be worth, so we’ll have to wait and see.
In other developments, the killing of the Washington Post journalist, seemingly at the hands of the Saudi’s have further complicated the relationship with respect to the kingdom and the West. We know that the market turmoil could be great because of the perceived strained relationship between the two countries, this adding to already volatile market conditions we saw leading up to the past weekend.
Sanctions if pursued by the US with respect to Saudi Arabia could have devastating effects for global markets and the international oil trade.
Stock futures as I write this are already pointing to triple digit losses coming into Monday morning and this while Sears officially declares bankruptcy, should make for a tumultuous trading week on the stock exchange.