The Tariff Man
It has been an eventful weekend. Trump has upset the Mexicans, the Canadians, the Colombians, the European Union, the Chinese a little, and the South Africans who were branded racist. He would have upset the United Kingdom, but rumours have it that the Trump administration was struggling to see what Britain produced.
Many of the sanctions have been withdrawn, and China’s were surprisingly light. The Hang Seng Index broke out and is set for a new bull run after the stimulus moves announced in September.
Hang Seng Index
It’s not just China. Latin America, especially Brazil, is doing well this year, as is Europe. The laggard is the US and not just in big tech. It would surprise many investors that since Christmas Eve, the US has started to lag the world. It’s early days for sure, but a weaker dollar will see this continue. When CAPR rises, US stocks beat the world and vice versa. Might US exceptionalism have finally peaked?
S&P 500 Currency Adjusted Price Relative (CAPR)
It would be ironic if true, but consider that Trump has inherited one of the greatest stockmarket bubbles of all time, combined with an overvalued dollar. The US is a good place to do business, and no doubt the economy will outperform other developed countries, but the economy is not the stockmarket.
Despite tariffs boosting the dollar in the short term, I believe Trump secretly wants a weaker dollar because it is the lever he can pull that US citizens won’t notice. He wants to see lower interest rates, which will boost the economy, and with that, the US dollar weakens. I have been saying this for some time, and sooner or later, I might even be proven right.
The US Dollar Remains Rich
This is non-consensus but is the view that follows the logic and the facts. I have no doubt the best and lasting opportunities are where the value lies. After all, what is the price of gold telling us, which just made a new all-time high? I sent a flash note last week, and here’s why.
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