Today’s Key Market Drivers: 3rd September 2019

Financial markets flat as the US pauses for Labor Day.

Stock and currency markets were reasonably flat on Monday as the US paused for a Labor Day long weekend that is traditionally seen as the last weekend of summer. September 1st also marked the first day of new income streams for both the Chinese and US Governments as their latest tariff increases kicked into gear. Base currencies gapped down against the Yen on Monday morning but most pairs closed those gaps reasonably quickly. I will be keen to see if Monday’s long weekend and the imminent hurricane that is close to Florida takes traders attention away from the new tariffs that threaten global economic growth. If it does it won’t be for long.

Financial markets will closely watch hurricane Dorian in the coming 48 hours as it inches ever so closer to the East Coast of the USA. The market’s reaction will be dependent on the size of the damage bill and subsequent drag to US economic growth if the storm does make landfall. I would expect economists will be out to quickly try and predict the damage to US GDP but we will keep our fingers crossed that the storm does not cause the sort of damage it has in the Bahamas.

The ultimate test of how you have lived your life.

According to the world’s greatest investor Warren Buffett, money and material things are not a mark of success. The scorecard that will tell you what sort of life you have truly lived lies in answering a simple question. And Bill Gates agrees. If you want to know what the question is click on this link.

RBA to keep rates on hold but more rate cuts are likely.

The RBA is widely tipped to keep the cash rate on hold at 1% today when it releases its September policy statement. Second-quarter GDP data is due tomorrow and is expected to show the economy is continuing to weaken and we should expect further rate cuts from the RBA in future quarters. If the RBA’s sentiment today is bearish and points towards weaker economic conditions and further interest rate cuts the Aussie Dollar is likely to go lower.

Keep in mind the Aussie Dollar’s direction is not just about what’s happening in Australia. If we are pricing the AUD v USD half of the equation of the AUD’s movement is dependent on what is happening in the USA. The US Dollar is a safe haven currency and if global economic conditions continue to deteriorate and trade tariffs between the US and China continue this will mean the Aussie Dollar will likely continue to decline.

US Manufacturing data will be closely watched today.

The next piece of high impacting US economic data is released today with the August ISM Manufacturing numbers. The reason why this data could be important for financial markets is that recently each piece of high impacting US economic data has pointed towards the US economy continuing to do well in the face of many economists who are predicting a US recession in early 2020.

Futures traders are still pricing in the expectation the US Fed drops the official cash rate later this month, and if it wasn’t for the recent fall in bond yields and inversion traders would not be anticipating the Fed to cut rates this month. The economic conditions simply do not warrant it.

My view is the US Dollar will continue to be a stand out performer and may even strengthen considerably further if the Fed leaves rates on hold in September which I think they will.

How a retail traders mind implodes and a gambling mentality begins.

Trading the financial markets is unlike anything you will have ever done before in your life. The level of manipulation and consistency with respect to outcomes is high in general life but that all disappears when it comes to trading the financial markets. As a trader, we have random probability outcomes and for the most part, unless you have been observing and trading for years financial markets often don’t make sense at all.

Therefore, the natural human mind that is new to the trading game struggles with the randomness of outcomes, the normal human mind continually wants to try and anticipate where the price is going next and then put a level of expectation on their view and the result. The reality is that anything can and does happen at any moment but the good news is once you retrain your mind to truly understand and accept how financial markets work it simply becomes a game over time.

Here are the principles and rules that I apply to successfully play the game over time.

  • Expect the unexpected and you do not know where the price is going next. Nobody does with any certainty.
  • Making profits over time can only be achieved by consistently reminding yourself that success comes over a series of trades and this one trade I am now in does not matter.
  • What matters is how you behave over a series of trades consistently. Alter the consistency (strategy & risk management) and you will fail. Maintain the consistency and you will win.
  • You are going to have strings of winners and you are going to have strings of losers.
  • All that needs to happen is that you take each trade and when you win you win bigger than you lose on average. That is the #1 most important element to successful trading.
  • It is not about how many times you win or lose, nor is it how many times in a row you are right or wrong. What matter is when you are right what do you make, and when you are wrong how little do you risk.
  • The human mind will always want to be right. You must accept that to trade successfully and make meaningful returns you need to be wrong a lot and you need to be comfortable with this.
  • There is an overhead in the trading business. It’s called your losses and if you want to survive you better keep them low.
  • You cannot pick winners! If you think this trade has a higher probability of winning than any other trade you are kidding yourself. No one trade or trader can predict absolute certainty in financial markets.
  • Your success will come down to how you play the game over a series of trades. What is a series of trades? 30 – 40 as a minimum.
  • Review your results after each quarter. It is a waste of time, energy and emotion to review your results week to week.

Brexit chances are rising according to the British PM.

British Prime Minister Boris Johnson is talking up the chances of a UK Brexit deal before the deadline of October 31st. Johnson reminded UK parliamentary members that if they vote this week to bring in new legislation to block a no-deal Brexit they are effectively going to force him into calling an election, which he says he does not want to do. Johnson said on Monday. “We’re leaving on the 31st of October, no ifs or buts. We will not accept any attempts to go back on our promises.

Life is a jungle. Either we fight for what we want, or we get eaten by those who want it more.


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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