Today’s Key Market Drivers: 26th August 2019
Trump is going to use his Twitter feed to force a market correction which will cause more recession fears and ultimately lower rates at the US Fed.
Donald Trump is known in business circles for being a bully when it comes to doing deals so we should not expect him to act any differently when it comes to getting his way as President. He’s failed to get China to bend to his demands on trade and he’s failed to get the Fed to drop rates more than 0.25%. What does a bully do when he doesn’t get his way? In my opinion, what Donald Trump will do in coming weeks and months is continue to attack the Fed and continue to attack China until the committee of the Federal Reserve is concerned enough that they lower interest rates.
He will continue to put fear into financial markets which have the potential to drive the US economy backwards and he knows this will force the Fed’s hand. He will also whine and moan about how strong the US Dollar is and how other Central Banks such as the ECB will bring on new stimulus measures and lower interest rates hurting the US economy.
Ray Dalio’s Xmas 2018 message looks more and more likely.
The largest and most successful money manager in the world Ray Dalio released a Xmas message to the markets at the end of 2018. I broke his message down for traders in my Xmas podcast that can be watched here.
What he outlined is how financial markets and the global economy have behaved over the past 300 years when a superpower is challenged by another rising superpower. History shows that military conflict eventually occurs after initial trade disputes turn sour, neither party backs down and things ultimately escalate into a war.
I am NOT predicting the US and China are about to go to war (history does show the probability is good) but if anyone wants to ignore and disregard the greatest money manager of all times views then in my opinion, they are not serious about protecting their family’s financial future.
What is there for markets to get excited about?
What’s it going to take to move safe haven currencies back lower and the stock market back higher? US trade tensions must subside but I just don’t see that happening in the coming few weeks. The market has wanted to sell off on US stocks indexes for some time after a 10 year / 250% + rally following the GFC.
Below are the fundamental events that in my view will see safe-haven assets continue to rise and stocks markets continue to remain bearish in the short to medium term.
- Central Banks will continue to lower interest rates.
- Europe will be in recession before the end of 2019.
- The 2- & 10-year bond yield inversion will occur again this week and cause more US recession talk.
- Traders will offload positions in companies with exposure to China.
- Markets will get increasingly concerned US company earnings will drop and thus sell down stocks.
- Safe haven assets and fixed income investments will benefit.
Plenty of US economic data to come this week.
There is plenty of US economic data to come this week with US Durable Goods, US Consumer Confidence, 2nd Quarter US GDP, July Trade Balance numbers and the latest Personal Consumption Expenditure. This data is backwards-looking and will likely continue to show the US economy is doing reasonably well and support Jerome Powell’s recent comments.
The G7 summit overshadowed by Trump and Xi’s ongoing trade feud.
The G7 summit in France which is attended by leaders from Germany, Japan, USA, Italy, UK, France and Canada usually gives the market something to trade off on the Monday following. With the events of Friday still hot on traders’ minds and the French set agenda light on for market-moving decisions, it is likely this year’s G7 is a fizzer if you are looking for a market reaction.
No Central Banks to report this week.
There are no major central banks reporting monthly statements this week with the RBA the first cab off the rank in September. Tomorrow I will report on what Governor Lowe said in his address in Jackson Hole, Wyoming which isn’t likely going to point towards a rate cut in September but he is likely to point towards rate cuts in future months.
Your trading decisions need to be clear, calm and decisive.
About the Author: Andrew Barnett
Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular keynote speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).
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