Navigating through the eye of ‘Hurricane Trump’

Tuesday, 27 March 2018
Melbourne, Australia
By Bernd Struben

  • Forget oil and German bunds…
  • The billion dollar breakout
  • Labor’s Pledge Will Trigger Business Uncertainty

You can say what you like about the recent market action.

But it certainly hasn’t been boring.

Plunging one day…soaring the next. If the market was an ocean it would be one besieged by unpredictable storms. Hurricane Trump, if you like.

I half expect to see investors take a dose of Dramamine before tuning into the latest market moves.

After tanking on Friday, US markets came roaring back yesterday (overnight in Oz).

The reason?

You guessed it. Investor sentiment over a possible global trade war seesawed back from ‘quite possible’ to ‘unlikely’. All over the course of a day.

That switch in mood was driven by news that top level economic negotiations were underway to improve trade relations. US Treasury Secretary Steven Mnuchin said that he was in direct contact with Chinese Vice-Premier Liu He.

China, as I’ve said before, has more to lose from a trade war than the US. Which might not mean winning a trade war is ‘easy’, as Donald Trump professes. But it does give the Chinese an incentive to make some concessions.

And some of those concessions are long overdue. Trump isn’t off base when he claims the trading relations with China are unfair. And the Chinese, certainly, are aware of this.

As market analyst Terence Duffy noted in Money Morning Trader earlier today:

It’s been fairly easy for Chinese companies to set up a business in the US. Just look at Alibaba Group Holding Ltd [NYSE:BABA]. It’s now a major player on the US bourse.

But it’s much more difficult for US companies to set up in China. US technology companies are forced to transfer technology and other intellectual property in joint ventures.’

Technology companies stand to be among the biggest gainers — or losers — of the ongoing trade negotiations. And with sentiment swinging back to positive, the tech heavy Nasdaq gained a whopping 3.26% yesterday.

The other US indices closed well into the black as well. The Dow gained 669.4 points. That’s its third largest single gain in history, in terms of points.

Of course, as quickly as investors decided a trade war is off the table, they could decide it’s back on.

All it will take is a single tweet from Trump.

More, after the markets…

Markets

Overnight, the Dow Jones Industrial Average closed up 669.40 points, or 2.84%.

The S&P 500 gained 70.29 points, or 2.72%.

In Europe the Euro Stoxx 50 index finished down 19.35 points, or 0.59%. Meanwhile, the FTSE 100 fell 0.48%, and Germany’s DAX lost 99.05 points, or 0.83%.

In Asian markets, Japan’s Nikkei 225 is up 467.25 points, or 2.25%. China’s CSI 300 is up 0.85%.

In Australia, the S&P/ASX 200 is up 38.70 points, or 0.67%.

On the commodities markets, West Texas Intermediate crude oil is US$65.56 per barrel. Brent crude is US$70.12 per barrel.

Gold is trading for US$1,352.57 (AU$1,743.90) per troy ounce. Silver is US$16.71 (AU$21.55) per troy ounce.

One bitcoin is worth US$7,825.88.

The Aussie dollar is worth 77.35 US cents.

Forget oil and German bunds…

At time of writing, Asian stocks are happily following the US indices higher. And index futures point to gains in Europe and more gains ahead for US markets tomorrow.

That’s good news. But let’s not forget about Hurricane Trump.



chart image

Source: International Space Station
Click to enlarge

Right now, investors are enjoying the eye of the storm. Only this storm is likely to have many eyes.

In a real hurricane (or cyclone, if you prefer) the eye is the eerily calm centre of the storm. The winds die down. The sun comes out. You might think it a great opportunity for a stroll. Or to do a spot of cleanup in your storm ravaged yard.

But the reality is you are still surrounded by hurricane force winds on all sides. There is no escaping it.

In Trump’s case I have no doubt that he will roil global markets again. More than once.

His goal is to squeeze as many concessions as he can from China, without launching a full on trade war. That’s why his latest US$50 billion in tariffs won’t go into effect for at least 60 days.

That means you should expect more wild threats and accusations from the self-proclaimed master of the deal over the coming months. This will keep the Chinese, eager to put the trade ructions behind them, on the back foot during negotiations.

It will also continue to feed investor uncertainty.

And as I mentioned yesterday, that uncertainty is good for gold.

Have a look at the chart below:



chart image

Source: Bloomberg
Click to enlarge

As you can see, while stocks have taken a beating over the spectre of a trade war, oil, German bunds, and gold have all benefited.

And while I expect oil has already enjoyed most, if not all, of its upswing from the trade jitters, gold should have much further to run.

The yellow metal’s haven status should see demand continue to climb as uncertainty remains centre stage.

Continued weakness in the US dollar will also help. A weak US dollar almost always correlates to high gold prices.

Perhaps that’s why Greg Canavan, the editor of Crisis & Opportunity, is more bullish on gold than he’s been since 2009. That’s when gold began a run that would see it gain 115% by mid-2011.

Greg’s analysis indicates gold will gain 50% over the next two to three years. That’s a healthy gain. And a good reason to consider allocating 5–10% of your investable wealth into bullion.

In his new report, ‘The Great Bullion Breakout’, Greg details precisely why gold should reach record highs in Aussie dollar prices. Though he believes there’s a far more profitable way to play gold’s rise than buying bullion.

The recommendation Greg made last Wednesday when he released the report remains an active buy. And as I said yesterday, while stocks broadly tanked around the world on Friday, the stock Greg tipped rose 7%.

If his analysis proves out, it’s far from done. Greg believes the stock could gain 100% by October. And as much as ten times that over the next two years.

All is explained in ‘The Great Bullion Breakout’. You can find that here.

The billion dollar breakout

If you signed up to the priority list to receive Ryan Dinse’s Whitepaper, ‘How to Land Mega-Baggers from “Silent Crossovers”’, you should have received that earlier today. If you don’t see it in your inbox, please check your spam folder as well.

I hope you’re as impressed with his premise, and the underlying research, as I am.

The next few months, as Ryan tracks the money flows from the big institutional investors, should prove interesting. And hopefully highly profitable.

Be sure to set aside some quiet time to give the report a full read.

And finally, if you’ve been following along with the corporate tax debate, here’s this from The Australian Tribune:

Labor’s Pledge Will Trigger Business Uncertainty

Imagine if a company promised to pay you $100,000 a year for your services. And they offered a lifetime contract.

Now before you sign on the dotted line, image that a competing board of directors has pledged to cut that pay to $80,000 if they get elected to run the company.

You’d likely rethink your commitment once faced with this new doubt.

And it’s precisely this kind of doubt that Labor intends to introduce over…’

If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.

Cheers,
Bernd