Economic Disorder: Trend Forecast 2017


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From coast to coast, no living American has witnessed anything like it.
The United States is a nation divided in ways and on issues broader than the Civil Rights movements, the massive Vietnam War protests and Richard Nixon’s impeachment of decades past.

Since January 20, when Donald Trump was inaugurated president, protest marches championing a myriad of causes have become common occurrences. Impeachment movements keep gaining support. New opposition forces continue to be created. And battles between the White House and corp0rate media have become daily fare.
Should animosities continue to escalate between Trump lovers and Trump haters, which has families, friends and colleagues fighting, more than just personal relationships will be destroyed. So too will be equity markets, real-estate markets and the retail sector of the world’s largest economy.

In a Globalnomic® world in which all things are connected, the economy does not live or grow in a vacuum. It is building strength now; equity markets have strongly risen to new record highs since Election Day. However, considering levels of discord throughout the nation, escalating tensions affecting Main Street also will affect Wall Street. Thus, should financial panic strike America, Europe, Asia and emerging markets also will suffer economic consequences.

Tracking trends is the understanding of where we are, how we got here and where we’re going. On the economic front, go back to Monday, 7 November 2016, the day before Election Day in the United States.

Over the weekend, FBI Director James Comey announced that “Based on our review… we have not changed our conclusions that we expressed in July,” that Hillary Clinton should not face criminal charges after a review of new emails. On that news, when the markets opened on Monday, the Dow soared:

Dow roars 371 points
after FBI clears Clinton again
You know it’s a wild election season when a letter from the FBI sparks a global stock market rally.

The Dow soared 371 points on Monday — the biggest burst of buying since late January — after FBI Director James Comey sent a letter to Congress on Sunday once again clearing Hillary Clinton in its email investigation.

The S&P 500 also jumped 2.2%, ending a nine-day streak of losses, the longest such slump since 1980. The Nasdaq raced 2.4% higher.

The latest FBI bombshell is clearly being interpreted on Wall Street as a boost to Clinton, the favored candidate of investors.

Investors are essentially “voting” with their money about which candidate they think would be better for the market.

“There’s no doubt that the day after the election, there will be less uncertainty if Hillary Clinton wins than if Donald Trump does,” said David Kelly, chief global strategist at JPMorgan Funds.

In fact, there’s a new Deutsche Bank research that predicts the opposite — a 10% plunge for European stocks if Trump wins on Tuesday. (CNN, 7 November 2016.)

The exact opposite happened. CNN and its paid-for-hire “experts” got it 100 percent wrong. Was it “fake news” or “pure stupidity”? Trump’s win ignited a historic equity-market record-breaker rally.

FLIP-FLOPPING WALL STREET

In the buildup to Election Day, Wall Street was strongly pro-Hillary Clinton. Markets moved up along with her poll numbers; they declined when they weakened.

Leading up to the election, as the race tightened, the S&P 500 posted its longest losing streak in nearly 36 years. In fact, so negative was The Street on Trump that on election night, when votes moved in his favor, Dow futures tanked some 800 points and gold spiked over $50 per ounce.

However, just hours later, in a sharp reversal, the onset of a Trump election rally would send stock indexes to new highs. In fact, the Dow soared 7.8 percent from the election to Dec. 31, its best Election Day-to-end-of-year performance since Dwight D. Eisenhower was elected president in 1952.

As is common knowledge, the Trump rally that continues to reach new highs is built on high expectations that he will dramatically reduce taxes, cut federal regulations affecting the financial sector and various industries, impose tariffs on imports that the Trump Administration claims will create higher-paying manufacturing jobs at home, and invest in rebuilding the nation’s rotting infrastructure.

In addition to the markets rising, so too has the strength of the US dollar as odds increase that the Federal Reserve may raise interest rates three times this year. The higher the dollar rises, the lower many currencies sink, particularly among developing and emerging-market nations.

And while President Trump attacks countries such as China for purposely devaluing their currency to increase export trade, facts prove otherwise. In Beijing’s attempts to curb capital outflows, foreign-property investment by Chinese companies plunged 84 percent in January while overall non-financial outbound investment fell 36 percent.

And in an effort to prop up its currency, China’s foreign-exchange reserves continued to shrink, falling below the psychologically key $3 trillion level.

GEOPOLITICAL ANXIETIES INCREASE

More than just growing fears that President Trump and White House officials’ actions could ignite both trade and currency wars — and his loose-cannon behavior could provoke an event that would destabilize markets — geopolitical concerns are spreading through Europe, as are fears of a recurring Greek debt crisis.

In France, for example, with riots increasing in Paris suburbs and discord growing against status-quo politicians and the entrenched system, Marine Le Pen’s anti-European Union, anti-euro National Front party’s odds of winning the presidential election continue to increase. Should she win and pull France out of the European Union, abandoning the euro, not only will it signal the demise of the EU and its currency, economic and geopolitical turmoil will ensue. If France exits and pays off its 2-trillion-euro debt with newly redenominated French francs, it will constitute, in effect, a default on the country’s debt.

In Germany, the Netherlands and Italy, strong eurosceptic, anti-immigration populist parties also continue to gain momentum, threatening the established economic and political European order.   TJ

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