President Trump plans to join the 2018 World Economic Forum, but how might his America First policies shape up in the forum? And what backlash are we seeing from trading partners as a result of new tariffs/ Read on for more details…
The “Global Elite” Descend on Davos in an annual conference of world and business leaders from around the globe. The World Economic Forum is largely a symbol of the globalization efforts where nations unite under the principle of economic unity and freer trade. Fittingly, the official theme of the 2018 forum is titled “Creating a Shared Future in a Fractured World.” The most attention on this year’s meeting is focused on President Trump’s attendance, since he will be the first U.S. president to attend the summit since Bill Clinton in 2000. Generally speaking, the themes and sentiment surrounding the meeting in Davos, Switzerland fly in the face of Mr. Trump’s “America First” policies and tougher trade stances. While the rhetoric shared at the meeting is largely symbolic in nature, market watchers are eyeing it closely to see if Mr. Trump doubles down on his America First policies or indicates a more open stance to globalization (according to Bloomberg).
Eyeing Tariffs – Zacks Investment Management has highlighted tariffs/trade war as one of the risks that could impair this economic expansion and bull market. In the trade realm, there are now a few stories that we believe are worth watching closely. This week, the Trump administration decided to slap steep tariffs on imports of solar panels and washing machines, in response to excess supply coming from countries like China and South Korea. Appliance-maker LG Electronics announced shortly after that prices were going up, and according to research from IHS Markit, that could mean a 15% to 20% increase for consumers. Backlash from trading partners is already coming through, with China calling them “an abuse” and with South Korea filing a complaint with the World Trade Organization. Meanwhile, back in North America, NAFTA is entering its sixth round of talks for reworking the deal, and parties appear no closer to an agreeable deal (according to the Wall Street Journal)
New Fed Chairman Confirmed – the new head of the Federal Reserve, Jerome Powell was confirmed by the Senate this week. Mr. Powell is seen by many as a natural continuum to policy under Janet Yellen, given his dovish tendencies in general, but his moderately hawkish stance in the current environment. The Federal Reserve is largely expected to continue normalizing interest rate policy, with perhaps 2-3 interest rate increases on deck for 2018. Mr. Powell is widely expected to stay the course. His predecessor, Janet Yellen, became the first Fed chair in nearly 40 years to only serve one term (according to Bloomberg).
Freighters Wanted – as a result of a combination of strong economic activity, inventory replenishment following holiday season, robust manufacturing data, and bad weather, there is a nationwide truck shortage in the U.S. While this may be framed as a ‘good problem to have,’ it also puts shippers in a bind – postpone deliveries or pay extra to move to the front of the line. The key takeaway from an economic data standpoint, which underscores the overall strength of the U.S. economy, is that freight volumes are close to record levels. Yet another reason in our view to believe that the risk of recession in the next six months in the U.S. is very low (according to the Wall Street Journal).
Trading All Day and All Night – the online discount broker, TD Ameritrade, announced this week that it is now offering 24-hour, around the clock trading on its platform for several popular ETFs. We believe that the same service for individual stocks may not be too far away. Long-term focused investors around the world shrugged at hearing the news (according to Seeking Alpha).
More Monetary Easing in Japan – as the Federal Reserve and even the European Central Bank tiptoe towards the exits of monetary stimulus plans, Japan appears firmly determined to continue its extraordinary monetary easing programs. The Bank of Japan stated this week that it would maintain its stimulus program as inflation tracked sideways recently, making it arguably the only game left in town of easing financial conditions (according to Bloomberg).
With a new fed chairman confirmed, Trump heading to the 2018 World Economic Forum and tariffs causing a stir, it is difficult to predict how the economy will shape up in 2018. And while current economic data has seemed firm in the U.S., it is still important to keep an eye on economic indicators and prepare yourself for any ups and downs. That is because when you are in the second longest running bull market of all time, it may make sense to start looking for signs of the next bear.
To help you do so, check out our stock market outlook report. Click on the link below to get your free copy today: