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Kelly Evans: The New Disorder

CNBC's Kelly Evans
CNBC

It's ugly out there in tech again today.  

The same theme as last week--the Nasdaq leading a sharp move lower--is back this week, but with a twist. There is still, thankfully, a "reopening" feel to the market overall today. Shares of Disney are leading the Dow. Delta and Alaska Airlines are among the best names in the S&P 500. American Airlines, Starbucks, and Fox are leading the Nasdaq, as I write this.  

But the laggards have a bit of a China bent to them. The chip names are getting whacked after the U.S. inflamed tensions in the sector by threatening to blacklist major Chinese chipmaker SMIC over the weekend on its reported ties to the Chinese military. Energy is getting crushed; oil, which quietly dipped back below $40 a barrel last week, is down another 8% today to under $37. This after Saudi Arabia cut pricing on its Asia-destined (read: China) crude oil by the most in five months, a cautionary sign for demand. Chevron is the second-worst performer in the Dow.  

To be sure, the "stay-at-home" plays like Zoom and DocuSign are down again today, but not by as much as we've seen; around 3.5% at last check.  

Back to China, the newsflow shows just how complicated our relationship with that country is. On the one hand, we're worried their demand is weakening. On the other hand, we want it to. As President Trump said yesterday when asked about the subject, "It's called decoupling, so you'll start thinking about it...we will end our reliance on China."  

Meanwhile the Chinese have refused to renew press credentials for a few of the main U.S. journalists still left there, including reporters for The Wall Street Journal, CNN, and Getty. In retaliation for us cracking down on their reporters earlier this year, apparently. Little wonder that "deteriorating U.S./China relations and the reversal of unfettered globalization" is the first of eight themes Deutsche Bank lists today in its piece explaining that the "Age of Disorder" is coming.  

Does anyone need convincing? Just look at what people on both sides are already saying about the upcoming U.S. election. Look at the unrest already unfolding across the country. One economist I know is warning people there's a 75% chance of a litigated election that could be drawn out for weeks. Pretty sure the age of disorder has already dawned.  

As for Deutsche Bank, their strategist Jim Reid warns this "threatens the current high global valuations," and that we can "wave goodbye" to the asset price growth we've seen over the past four decades. His sources of disorder include not just the de-globalization mentioned above, but also inequality, climate angst, the priorities of younger policy makers, and the tech revolution ("Big cities were huge winners in the previous era, and this could now reverse" if work-from-home stays permanent, he notes).  

China, meanwhile, he expects to become the world's largest economy around the end of this decade or soon thereafter. But that is one area, at least, where he doesn't expect the upcoming election to have much impact. Relations, he says, "are likely to deteriorate into a bipolar standoff as both the U.S. and China seek to prevent encirclement by the other," no matter who is president.  

Still, that's not great news if you're one of the leading American multinationals, like Apple and Starbucks, dependent on both countries. Or if you're a smaller firm dependent upon the globalized supply (and demand) chain. "Companies that have embraced globalization will be stuck in the middle if relations sour as we fear," Reid writes. The NBA has already showed how difficult a position that is.  

Add it all up and the U.S. may be more dependent upon itself in the decade to come than it has been for years--if we don't tear ourselves apart first.  

See you at 1 p.m! 

Kelly 

Twitter: @KellyCNBC

Instagram: @realkellyevans