What’s worse than a politician who breaks all of their promises after they’re elected?
The answer may be a politician who doesn’t.
At least, that could be the case if your nest egg is invested in the stock market. Especially in companies that rely on international trade and stability.
The big news early this week was the executive orders President Trump signed in his first few weeks in office. Controversy is raging over the US–Mexico wall and the bans on immigration and refugees.
I won’t get bogged down in the debates over security benefits, or lack thereof. I’ll similarly not waste too much ink on our Prime Minister’s hurt feelings after Trump hung up on him Thursday. Our concern is stock markets. And the effects on stock markets from Trump’s moves are already impossible to ignore.
Less attention has been paid to Trump’s infrastructure plans, at least in the mainstream media. But he’s paving the way for his planned infrastructure spending, just as much as he’s focused on immigration. That could have much larger direct consequences for your wealth.
But wait, you say. Why the gloomy opening, when the headline so grandiosely promises ‘quick gains’?
Well, there are two sides to every trade, aren’t there? For everyone who buys at the top of the market only to get wiped out, someone else has sold at the top of the market. And in times of turmoil, opportunities can be born.
In this week’s Money Morning line-up, your editors didn’t just look at the immediate winners and losers on the market as Trump began fulfilling election promises. The short term effects are more obvious, but may be less important. The long term consequences, intended or otherwise, could mean much more for the US economy. And from there the effects will echo across the world.
Which industries have seen sharp gains in the wake of Trump’s flurry of executive orders? Where might the next round of opportunities be found?
Read on for what your Money Morning Editors had to say this week…
In Money Morning This Week
On Monday Sam looked at one close insider on Trump’s team who has benefited on the stock market during Trump’s election campaign and triumph. Canny investing? Incredible luck? Or does it pay to have friends in high places? Whatever the source of his unbelievably good results, this is one major investor that it could pay to follow closely. To read the details, you can find Sam’s article here.
But not everyone has the inside track on government policy. Most of us have to invest based on publicly available information. The sort of thing that anyone can find in the media. And right now the media is frothing, with Trump’s supporters and detractors caught in an escalating war of words.
How do you see past the anger and hyperbole, and navigate your investments in a changing world? In Tuesday’s Money Morning, Sam looked at the winning and losing industries from Trump’s first executive orders. Fast-moving investors have seen some sharp gains since Trump’s inauguration. Others have been caught flat footed by sudden falls. Sam says there are still quick gains to be made, if you act soon. To find out how, you can read Tuesday’s Money Morning here.
On Wednesday, Greg looked at the most powerful emotion in markets — fear. Much of Trump’s election campaign was founded on fear. And now that he’s in office, he’s continuing to score points with his supporters by exploiting their fears. But are protectionist policies and fear of the outsider actually good for the economy? Will tearing up trade deals and slapping tariffs on imports make Americans richer? Does anyone ever really win in a trade war? Or is it just degrees of losing? Most important for you, what will the fallout be for Australian investors? You can read Greg’s thoughts in Wednesday’s Money Morning.
One of the key targets Trump has promised to take down is the large surpluses some US trade partners have amassed. During his campaign he accused China of currency manipulation. But recently, one of Trump’s close advisers, Peter Navarro, publicly took aim at Germany. He accused it of taking advantage of its cheap currency, at the US’ expense.
As Greg explained, Navarro is a protectionist. He wants to see the US producing more than it consumes. And if the free market won’t give him that, then he believes the US government should force it. But is that even possible, in a global marketplace founded on US debt? Greg argued on Thursday that trying to create Navarro’s world would cause massive destruction to economies everywhere.
That doesn’t mean Trump’s team won’t try it, though. And, as Greg noted, there is one way to reverse the trend of the US exporting debt and importing goods, without kicking off a collapse. To read how, you can find Thursday’s Money Morning here.
But perhaps the Trump presidency’s economic policy isn’t so easy to predict. Greg wrote on Friday about shock comments from Trump late this week. Trump spoke dismissively about the US’ relations with all of its trade partners. Could Trump really be planning to up-end the entire post-Second World War global economic system? If so, he may fundamentally misunderstand the consequences of his actions. If he follows through on this, Greg explains that everyone will suffer — likely the US most of all.
Australia certainly wouldn’t be spared any pain. Both from souring relations with the US, and a potential collapse of China’s economy. To read the details, you can find Friday’s Money Morning here.
In this week’s Financial Anarchists podcast, Kris and James welcome special guest Ivan Carrino, Economic Analyst for Inversor Global. He speaks on the dangers of government interference in markets, and the economic risks from the rise of populist governments worldwide.
That’s it from your Money Morning team this week. Enjoy your weekend!
Editor, Money Weekend
Prices of Interest, as of Friday’s Close
Gold: AU$1,586.57 oz
Silver: AU$22.68 oz
Aussie Dollar to US Dollar: 0.7649
West Texas Intermediate Crude Oil: US$56.79
ASX 200: 5,621.60