The focus is shifting to fiscal policy. President Trump speaks to a joint session of Congress on February 28. It could be the most important speech of the first 100 days of the Administration. The most important part of the speech for investors and businesses will talk about tax reform. Treasury Secretary Mnuchin still seems optimistic...
The shortest version of Trump's campaign promises included less regulation, lower taxes, repealing Obamacare and infrastructure stimulus. Naturally there was much more than that but he talked like a man who was used to getting things done and his slowly finding out that Washington moves slower than an arctic construction project in January. One third of his first hundred days...
How to Trade President Trump
We think Trump will pursue a policy of weaker US dollar. Whether this will turn into direct policy, could be more clear by end of March. We see US dollar index testing the 96.00 level on unchanged policy. If confirmed that weaker dollar is the new policy of choice, the dollar cycle could be turning down in a traditional 8-year cycle.
It would seem that the USA tax overall is, if nothing else, bullish for the USD. It is perhaps somewhat surprising that the USD has not risen more in response to Trump and Republican tax overhaul plans. This is especially the case since the US equity market has appeared to be more clearly and consistently lifted by the prospect of tax overhaul.
|Key Trump Promise||Effect on Stocks||Effect on USD||Effect on Gold|
|Increased fiscal spending/stimulus - Particularly on infrastructure and defense||Bullish - Increased economic growth and industrial production help boost equity markets||Bullish - Increased spending leads to higher inflation and interest rates, pushing up USD||Bearish - Higher growth, interest rates, US Dollar and stocks should weigh on Gold|
|Lower corporate taxes - Down to 15% from 35%||Bullish - Lower taxes increase after-tax cash flow and earnings, and bring income back to ||Bullish - Economic growth through lower taxes and fiscal stimulus boost interest rates / USD||Bearish - Higher growth, interest rates, US Dollar and stocks should weigh on Gold|
|Financial deregulation - Repeal heavy regulations on Wall Street and corporate America||Bullish - Fewer regulatory hurdles increase financial and banking activity, fostering business growth||Bullish - Increased financial activity leading to economic expansion should lift interest rates and USD||Bearish - Higher growth, interest rates, US Dollar and stocks should weigh on Gold|
|Increased job creation - Retain and create jobs in the US||Bullish - More jobs lead to higher spending, demand and increased business growth||Bullish - Better employment rate leads to hawkish Fed and higher interest rates / USD||Bearish - Higher growth, interest rates, US Dollar and stocks should weigh on Gold|
|Protectionist trade policies - Tariffs and restrictions on Mexican, Chinese ||Bearish - Restrictions on trade can create trade wars and backlash on US companies doing business abroad||Bullish against targeted EM currencies, Bearish overall if trade wars result||Bullish if trade wars result, which could boost gold as a safe-haven currency alternative|
What is the Trump trade? How long it will last and what are the major things that the trader should focus?
After the elections in Europe this year, it will become increasingly clear that the Brexit is good for both parts, the United Kingdom and the European Union. Sterling will be a good bet for the second half of 2017.
US stocks going to rally another 10% before summer and then we will see risk off. It is time to make a big switch to bonds.
Notwithstanding the strong demand for gold and silver globally, buying activity in the U.S. retail market for physical bullion has fallen noticeably in the wake of Donald Trump’s election victory. And retail selling in the U.S. has increased. The bullion markets have entered a new phase. The two terms of President Obama included the aftermath of the 2008 financial crisis, zero interest rate policy from the Federal Reserve, and...
Donald Trump, the US President has taken the country out of the Trans-Pacific Partnership. He wants to redo the terms of the NAFTA agreement and use the lure of the U.S. market to redress what he says are unfair trade arrangements. Are international trade agreements unfair? Do they penalize certain groups for the greater whole as economists argue? Can Trump's administration impose new terms of trade...
The Trump administration's “America First” mantra is predicated on a withdrawal from the Trans-Pacific Partnership (TPP) and a renegotiated North American Free Trade Agreement (NAFTA). If Canada and Mexico cannot see Trump eye to eye in the coming talks, the President will simply give notice of the US intent to withdraw from NAFTA. The new White House intends to crack down...
For some reason, currencies are a particularly difficult concept for Americans to wrap their heads around. Just ask the new US President, who reportedly called his national security advisor at 3am one day in February to ask if a strong US dollar was good or bad for the US economy. Not surprisingly, the national security expert allegedly demurred, suggesting that...
USD/MXN: The Trump Trade
Banco de Mexico announced a new FX program to help support the peso without draining its foreign reserves. While this should help lower FX volatility near-term, the peso is benefiting more from a more benign EM backdrop and signs of thawing US-Mexico relations. Tensions remain high as President Pena Nieto and his government has said they refuse to accept unilateral US actions on immigration.
USD/MXN Best Spreads
Donald Trump, a billionaire real estate mogul billed as the ultimate outsider, aims to shake up the US political establishment, which could potentially cause extensive market volatility along the way. Going forward, Trump should have a substantial impact on various key financial markets such as US Dollar, Euro, Yen, Pound and other important currencies as well as stocks,
Trump was the second major-party presidential nominee in American history whose experience comes principally from running a business (Wendell Willkie was the first). By getting elected, Trump became the first United States President without prior government or military experience, and the first without prior political experience since Dwight D. Eisenhower.