The US election yesterday is an historic event that has massive repercussions for every part of what makes America. And, without further ado, I wish to make my own announcement, which is that I have a new partner. Together, Dr. Owen Williams and I will start 2017 as an American partnership registered as a money manager in South Carolina under the trade name WMA Cara.
This morning Dr. Williams issued the following market report:
Dear Investor,
Financial markets are bracing for a potential Brexit on steroids. Donald Trump has been elected the 45th President of the United States. And equally importantly the Senate and House will remain Republican. No one expected this, especially not Mr. Market.
In the short-term, stock markets could come down sharply in the coming weeks (more due to the overvaluation of equities rather than the election results) as the shock of an anti-establishment, anti-Wall Street bank candidate triggers the cascading stock market correction that we have been waiting for. Moreover, markets will react negatively to the Republican sweep, as historically the stock market has been weakest when one party controls both Congress and the White House. However Trump’s policies are positive for long-term economic growth and we are even more optimistic on America’s economic future. We must remain cautious near-term, however, in relating stock market performance with economic performance, which for the past years have been two completely different beasts.
A bigger question is what will happen with the Federal Reserve. Trump has called the Fed and Janet Yellen “political”, “incompetent”, and “responsible for blowing the stock market bubble”. We expect Yellen to resign early next year. It would seem completely incompatible for the Fed chair to serve a President who has no confidence in her. This will roil markets. As for the December Fed rate hike, our guess is that the Fed moves forward with a 25 bp hike. Yellen is not going to do a political favour for Trump. Fed Fund futures are now pricing less than a 50% chance of a December hike following Trump’s win. However markets have been so wrong – wrong on Brexit, wrong on the 2-day rally this week anticipating a Clinton win, and now wrong on anticipations of a December rate hike. A Fed rate hike after a Trump win could put the S&P 500 at 1800 by early 2017.
Our DGR strategy portfolio is impeccably positioned: Gold, Silver, Miners, China A-shares, and cash. Gold is surging and Shanghai is only down -0.40% in early European trading. We also note that the first thing Trump said after his victory was that his priority is “rebuild America’s roads, bridges, schools….to make American infrastructure second to none”. While markets will be very choppy in the final weeks of 2016, we strongly recommend that investors wishing to stay invested move into the U.S. infrastructure trade. We have designed a specific index, the WMA Roads, Bridges & Water Index to best play the promised $500 billion that will be spent on infrastructure projects over the next four years.
Dr. Owen Williams
We think our future and America’s future is a bright one.
Much more news to come…
/Bill
