The prevailing market narrative is the trade war.
Unless you’re living under a rock, you know that President Trump is in trade spats with China, Canada, Mexico, and the European Union (just to name a few).
Every turn of the market this year has been due to trade war rhetoric.
The market seems surprised by this…I’m not sure why.
Trump has been saying the U.S. is getting the short end of the stick on trade deals since the 1980s (and he is right).
He should know better than most—he’s an international businessman. He’s had to deal with foreign governments and play their games and I’m sure they’ve burned him a few times. He is a seasoned deal maker, perhaps the only president ever with that qualification.
None of this trade war talk should surprise regular readers.
That brings us to my theory…
It appears that President Trump is using the stock market as a litmus test for his trade negotiations.
When the market rallies a little, he escalates his trade threats. When the market sells off, he tones them down.
You see, I have worked out that Trump doesn’t want to tank the stock market. He knows that the media uses it as a proxy for the overall health of the economy. This is why the market has been moving up and down in a range with no defined, prolonged trend…yet.
He wants the U.S. to get fair trade deals. So, he’s going to push hard for them. Just how hard, depends on the market. But he also has to take care of his party.
Here’s how my theory works…
Midterm elections are in November. President Trump is a Republican. Obviously, he wants to keep a GOP majority in the House and the Senate.
One of the best ways for the majority party in Congress to keep its majority is to show voters a healthy economy and roaring stock market. As Bill Clinton famously said during the 1992 presidential campaign, “It’s the economy, stupid”.
This is how I think Trump’s plan will unfold…
The president will keep up his tough trade rhetoric for a while. That will keep a lid on the market this summer.
As the midterm elections approach, he’ll start toning down his rhetoric and signing new trade deals with China, Canada, Mexico, and the European Union. Yes, the man will get deals done. Heck, when he threatened to wipe North Korea off the map, the world was taken totally by surprise when talks opened up,
Once he does deals, the market will rejoice… It’ll be off to the races.
I’m looking for him to strike some deals starting in late August or early September. Those deals should set off a market rally for the ages.
A soaring market would likely benefit his party during the elections.
To be clear, I have no idea whether Republicans will retain their majority. But here’s the thing: It doesn’t matter. What matters is that the market will rally going into the elections if we see new trade deals.
I’ll go on record and say we’ll see a 15% rise in the two months leading up to midterms. Some stocks will go up by 50 percent, 70 percent, or more.
It’ll be a great time to own stocks. But some will do better than others, especially large, multinational companies. Think Boeing, Caterpillar, and Procter & Gamble.
You can consider adding them to your portfolio today, but like I said, we’ll likely see some volatility this summer.
If you want to buy now to make sure you’re involved in this trade, start with a small position… then add if/when trade negotiations provide a lower entry point.
The High Performance Companies with the best growth will rocket. Things like the EDC Emerging market fund which is down 50% this year will likely double…not all stocks will rise the same, so maximise the opportunity get my book, read it, and then take advantage of my free consultation valued at $1495, yours for free…so, go to www.truthininvestingbook.com now.