In a Nutshell: The Corona Virus Was a Perfect Smoke Screen for China  

The emergence of COVID-19 remains very suspicious! It appeared to solve more problems than it created for the Chinese Communist Party. First, it negatively impacted President Trump’s re-election chances by causing significant damage to America’s economy.  It has certainly provided fake news outlets with more excuses for Trump-bashing. The CCP’s nearly month-long delay in being honest about the virus has severely damaged economies around the world. COVID-19’s negative impact on the U.S.has even been magnified (because Trump’s positively impacted economy was running at record high levels prior to COVID-19).

In addition to damaging free world economies, this Wuhan-initiated pandemic provided somewhat of a smoke screen for China’s power play in Hong Kong. Time will tell if the CCP also plans to use it to further threaten or subrogate Taiwan (which could become extremely dangerous to world peace).

What may have sounded like a conspiracy theory in March is now getting intensive international scrutiny in June. What did the Chinese authorities know, and when did they know it before announcing that the SARS-nCOv-2 (later COVID-19) virus was highly contagious and transmissible between humans? We know the CCP knew of this danger well before Jan. 20. The Chinese foreign minister has also gone out of his way to explain that this particular strain of coronavirus was never studied at the Wuhan Institute of Virology, but only had its genome sequenced there after the pandemic had already started. (Few in the White House appear to believe this mumbo-jumbo diplomatic explanation.)

Other world governments are also starting to ask questions as to the sequence of events in China. Many of those countries will likely struggle with financial recovery much more so than the U.S. Poorer governments do not have the ability to do complicated central banking operations to support their capital markets, nor do they have health- care systems to deal with the CCP’s pandemic. This virus has recently spread into many emerging markets in Latin America and Africa, where the worst for them may be yet to come. Entry into the U.S. from Brazil for non-US citizens is now banned because of the serious outbreak there.

Xi Jinping is now moving on completely controlling Hong Kong, bypassing the local legislature and rubber-stamping a new security law in Beijing. This will violate the terms of the “handover agreement” with the British for Hong Kong and conveniently comes at a time when other global powers are distracted by the coronavirus recession. (The free world hopes that Taiwan, which has always been treated by China as a renegade province, is not the next CCP target.) 

Hong Kong issues already had been escalating before the coronavirus distraction. What else might the CCP have planned before U.S. elections? That uncertainty may be one reason why the Hang Seng Index has been depressed. It is close to its March lows, which are likely to be “taken out” as the situation gets worse. Hong Kong repression will NOT be met with applause in Washington, so the potential for further escalation in the U.S.-Sino rift is very real.

Most recently, China seems to be doing whatever it can to take advantage of Antifa-led rioting throughout much of America. While the U.S. deals with Antifa’s destruction, theft and brutality, we wonder who their backers may be. Could the CCP be supporting the usual “bad actors” behind anti-American Antifa criminals and their destructive actions? What else does the Chinese Communist Party hope to do to weaken Trump’s reelection chances?

The stock market is also confusing a lot of people right now. It seems simple: Most news is bad, across the board. There’s a pandemic for the first time in generations, people are still dying, and the economy has taken a beating. There’s ongoing bitter political infighting. Riots in major American cities don’t help. Stocks should go down, right? But they haven’t. Markets have recovered the majority of their March slide and are near their all-time highs in what turned out to be the shortest bear market in history.

The fact remains that stocks surged mightily in three late March days. The definition of a “bull market entry” after a “bear market low” is a 20 percent recovery from the market low. The Dow Jones Industrial Average rallied 21.3 percnet from Monday, March 23 to Thursday, March 26—just three days—the quickest bear-to-bull market entry on record (as tracked by Dow Jones Market Data Group). That was a monster rally! In the past two months, the major U.S. stock indexes gained between 31.6 percent (Dow) and 35.9% (NASDAQ), averaging +33.7 percent from the depth, despair and uncertainty before this record rally began.

The market is in a bit of a confusing spot right now. From my colleagues on Wall Street: News and fundamentals (sparked by the coronavirus as well as China uncertainty and riots) say SELL! Technical and price performance say, BUY! Leadership is both logical and confusing. Yes, we are (probably) overbought, which would incline one to sell; but, market strength could last a while longer, along with market volatility. The market could be giving us a bonus round with which we could potentially rack up huge gains while we wait for a downward turn. Or, it could turn ugly tomorrow. Econometric models cannot be relied on as in the past. The market doesn’t have to make sense. We just need to be able to adapt as the environment changes.

The view expressed are by the author’s only.