Today’s Key Market Drivers: 2nd January 2019

Welcome to a new trading year and a new look GoldRock Insider Report for 2019. Financial markets certainly didn’t slow down over the Xmas break with plenty of volatility and I don’t expect things to change any time soon.

December was the worst month for US stock markets since the 1930’s Great Depression and whilst that may sound alarmist, successful and respected investors Ray Dalio and Stan Druckenmiller are concerned that interest rates rising and the level of debt accumulated in the USA over the past decade will likely trigger a slowing in growth and a sustained bear market for stocks over the coming 2 – 5 years. If you have not yet had an opportunity to read and watch two of the pieces I sent via Trade Time over the Xmas break please do so in coming days.

Safe haven assets including the Yen performed strongly towards the back half of 2018 and the Aussie Dollar continued its slide lower to make a new two year low just above 0.70c.

My expectation is that in coming weeks US stock markets will likely make new lows and history shows when a credit cycle change forces a bear market the Aussie and Kiwi Dollar usually slide lower. The Chinese pumped huge amounts of money into their economy in 2008 and this helped boost the Australian economy but question marks remain just how much ammo the Chinese will have if a global economic slowdown occurs in the middle of a Trade War with the USA. Certainly, any stimulus package the Chinese announce will boost the Aussie Dollar but growth will have to slow further for this to occur. My general fundamental thoughts that I have been commentating on prior to Xmas have been solidified even further over the Xmas break following my annual reading and studying. The Xmas to New Year period saw a lot of volume taken out of the market as Hedge Funds and Investment Banks took a break. This gave high frequency and algo traders the ability to swing markets back and forth like yoyos. I expect as the new trading year unfolds volumes will pick up again and the huge swings being created by high frequency and algo traders over the Xmas break will likely become more one directional. Meaning, if the market is up 600 points on the Dow Jones, the chances of the day finishing 400 points lower will diminish.

Moving into 2019.

My expectation the US Dollar may weaken in 2019 has not changed however if stock index markets continue their decline the weakness on the greenback is likely going to be focused against the Yen, Euro and Pound.

The Pound whilst vulnerable to any Brexit news has continued its rebound higher along with the Euro and my expectation is that both currencies will perform well against the US Dollar in 2019. The major themes we must keep a watchful eye on are the following. 1. How the change in the short term debt cycle impacts currency markets this year. The probability is we will see a continuation of a bear market and low growth in stock prices for the next 2 – 5 years. 2. How the trade war develops between the USA and China. 3. Brexit. 4. A slow down in world growth lead by the USA and China. If the slow down is steeper than expected the chances of a global financial crisis increases. (today sees the release of the first China manufacturing figures for 2019.)

The first half of the 2018/19 financial year (from 1st July) I finished with +18%, however, I gave back 4% through October and November. My average risk per position is 1.7% and I took 47 trades with my first trade this financial year being the 26th of July. (I took July off whilst holidaying overseas.) So, the result is really for 5 months. It goes to show that to make higher than average returns you do not need a high success rate and the key is simply winning bigger than you lose and controlling your temperament over time. A full list of every trade detail is available by click on this link. There are a number of areas I can improve as a trader which include staying with my trades when the market is moving in my favour and also being a little more aggressive and adding volume when my conviction on a trade is high. I hold no expectations for 2019 other than to continue to trade my plan and execute with a clear, calm and decisive manner.

I wish you every success in 2019 and look forward to sharing with you my thoughts on financial markets as the year unfolds.

Any trade updates throughout the day will be sent via Trade Time. You can also follow my daily updates on Facebook, Twitter, Instagram by searching for TrainwithAndrew. Make sure you subscribe to the Andrew Barnett YouTube channel after watching today’s Sunrise video below.

 

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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