Presented by Rosecut

Hi John, here's what you need to know for November 6th in 3:05 minutes.

🤝 Finimized while planning our long-term financial futures – and preparing for all the little surprises that might pop up along the way – with our friends at Rosecut.

⏳ Keep it brief

Clash Or Credit

What’s Going On Here?

With one eye on securing a trade deal and another on looking like the winner, the US is thinking about removing tariffs on $112 billion worth of Chinese goods.

What Does This Mean?

The US-China trade war has cast a long shadow over the global economy lately, so any de-escalation in tensions should – at least for now – give it a bit more room to breathe. That newfound optimism might be why US stock markets hit record highs again this week. And the East has benefited too, with both Asian markets and the Chinese yuan on the rise. That marks a sharp about-turn from the jitters investors felt back in August, when the yuan was weakening and the US responded by labeling China a “currency manipulator”.

Why Should I Care?

For markets: Stocks before bonds.
Easing trade tensions have put stocks back on the map. Just look at the Chinese stock market, which is on track to be the best-performing major stock market of the year (sorry, Greece, we said major). And while bonds are also having a stellar 2019 following interest rate cuts from several major central banks, stocks look like they’ll benefit more from investors’ growing risk appetite. Indeed, some analysts think bond prices will fall and stocks will continue to rise over the next six months – drawing parallels between the current environment and the mid-90s, when the Federal Reserve also cut rates as an "insurance" measure.

The bigger picture: This is going to be a long ride.
Both the US and China are incentivized to get a phase-one trade deal done: the US president is looking to prop up his reelection prospects next year, while China is trying to speed up its slowing economy. But China is still growing three times faster than the US, and tensions between the two are likely to persevere – albeit maybe in different ways – as China continues to challenge the US’s dominance (tweet this).

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Oil That Glitters

What’s Going On Here?

OPEC – the influential group of 14 oil-producing countries – announced on Tuesday that it expects demand for its oil to fall sharply. That ain’t golden.

What Does This Mean?

The US has become the world’s largest oil producer, thanks in large part to rising output from the hydraulic fracturing – or “fracking” – of US shale oil. And that, in turn, is creating an oversupply which is displacing more established producers – namely the oil-producing nations collectively known as OPEC. The group now sees its share of the global oil market falling from 37% to 31% by 2024 – leading it to slash demand estimates for its oil by 7%.

Why Should I Care?

For markets: From Aramco to Aram-no thanks.
OPEC’s reduced forecasts won’t be good news for Saudi Arabia, which is currently trying to fetch a $2 trillion valuation for Aramco, its national oil company. Lower demand for OPEC’s oil could force its members – including Saudi Arabia – to reduce output even further from already-agreed levels this year, or else risk too high a supply pushing down prices. At around $60 a barrel, oil prices are currently too low for most OPEC countries to cover their national spending. This might give potential investors in Aramco’s initial public offering pause: lower oil prices or reduced production could spell trouble for its overall revenue.

The bigger picture: Cuts beget cuts.
With US oil output expected to climb more than 40% by 2025, OPEC is under pressure either to cut production further or compete more fiercely over a shrinking piece of pie. Its current strategy might be backfiring: investment in US shale oil drilling increases whenever OPEC slashes production to prop up the oil price, perpetuating oil’s oversupply and trapping OPEC in a spiral of production cuts. And while OPEC forecasts global oil consumption will continue until 2040, it doesn’t much help that sustainability-minded countries are shifting away from fossil fuels.

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💬 Quote of the day

– Bob Dylan (an American singer-songwriter, author, and visual artist)