Polls and pundits got Trump Rally wrong. What’s next?
The Trump rally that has boosted equity markets around the world will be 7 months old.
It wasn’t supposed to be like that.
Mega-billionaire George Soros who bet big against a Trump victory also bet big against a Trump market rally. Back in January, the Royal Bank of Scotland advised clients to “sell everything” because “in a crowded hall, the exit doors are small.” And all those economic prophets of doom, who predicted a biblical economic collapse since Election Day, still are.
Not the Trends Journal.
Just days after Donald Trump’s White House win, we did a 180. From forecasting negative markets, strong gold prices and a weak economy, we predicted rising markets, falling gold prices and a continuation of moderate economic growth.
The trend is your friend
In the closing hours of Election Day, 8 November 2016, when Trump began to pull ahead of Wall Street and polls favorite Hillary Clinton, Dow Jones futures tanked over 800 points and gold spiked over $50 an ounce.
Almost immediately, however, the markets reversed. Since that time, equities have been on a steady upward trend, hitting new highs. The exception was a sharp drop on May 17 when stocks fell 372 points on news that Trump allegedly pressured former FBI Director James Comey to go easy in his probe of Michael Flynn, the former national security adviser.
However, the markets quickly and solidly rebounded when Wall Street dispelled fears that Trump’s plans – to stimulate the economy by lowering taxes, cutting regulations, trimming the budget and investing in infrastructure – would be bogged down.
Yesterday, today and tomorrow
Along with the US markets’ rise, the dollar spiked in anticipation of the Federal Reserve raising interest rates at least three times this year and Trump policies pushing inflation higher. In response, gold prices fell. Higher interest rates mean higher opportunity costs of holding non-interest-bearing precious metals such as gold. Now the dollar has retreated back to pre-Trump victory levels; gold prices have stabilized at around $1,250 per ounce.
TREND FORECAST: For the first time in 28 years, China’s debt was downgraded by Moody’s. Venezuela and Brazil are trending toward high levels of violent social unrest. Tensions between nuclear-armed Pakistan and India are escalating. With each new missile launch by North Korea, war drums beat louder.
The US is ratcheting up sanctions and war talk against Iran. Anti-Russia hysteria mounts daily. Populist movements, while tamed in France, are accelerating in Italy, Austria, Hungry, etc. The list goes on.
While we expect overall moderate economic growth, we predict increased geopolitical unrest and civil disorder in a deeply divided US. Thus, while a strong dollar will put downward pressure on gold as interest rates rise, we maintain our forecast that gold, as well as some cryptocurrencies, will maintain their status as safe-haven assets. Moreover, while we forecast a 10 percent market correction, Trump’s wild card behavior could trigger significant downward spirals in global markets.