I settled in for a couple of hours the other day to watch the Trump interview with the Bloomberg Editor-in-Chief, John Micklethwait.
When Trump said there wasn’t a more beautiful word in the English language than ‘tariff’, I knew I had to sit up and take notice.
As his odds of winning the election on 5 November go through the roof, it pays to consider how the market may react to his future policies.
He wants to impose a blanket 60% tariff on Chinese products. He wants to raise car tariffs so high that no cars come into America from Mexico at all.
He has his eye on the Europeans as well, saying that America has made terrible deals with the Europeans in the past.
Goldman Sachs said that if Trump imposes the Chinese tariffs as threatened it could lead to Chinese growth being cut in half over the next few years.
How will that play out for Australia and resources demand?
How will that affect China as it continues to struggle with a sick property market?
What happens to US inflation? The US dollar?
Does it spark a game of tit-for-tat protectionism around the world?
We called a roundtable discussion of all the editors during the week to discuss the issue and other matters. The consensus seemed to be that politicians say all sorts of wacky things before they get into power.
Once they assume the reins they usually water down their threats as realpolitik takes over.
That may very well be the case, so a wait and see attitude is prudent.
But after considering the above I think it is also prudent to realise that we may see some wild moves before or after the election.
China recently sparked a sharp rally in Chinese stocks on the back of stimulus measures to support their property market. But the heat is rapidly coming out of that rally as more pundits doubt the effectiveness of the measures announced so far.
It is a serious tug of war going on. Trump’s tariffs could add another wild card which could snuff out the nascent rally in Chinese stocks.
That is why I begin today’s Closing Bell with a detailed analysis of the Hang Seng to create the lines in the sand for you as we move forward.
The technical set up is an explosive one. As long as major support can hold I remain tentatively bullish. But if support fails, there is not much support below.
I also look at the rapidly rising fortunes for uranium and finish with a quick look at the oil price, which remains stuck in a downtrend.
I’ve put together insights from my 30+ years of trading that will help you navigate market volatility and improve your performance.
I believe that the key to long-term investing success is a solid trading plan and a long-term mindset. I put this into action in my service Retirement Trader.
You can learn more about my approach by clicking here to get access to 30 years of trading knowledge.
Regards,
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Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps
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