Global Investment Strategy

GIS November 21 (The New Paradigm)

Date: 2016-11-20 - Prepared by: The GISI

The “Trump Rally” got ignited as several republican billionaires, who were mostly in cash, called each other the early morning of November 9 and decided to simultaneously invest into US stocks. All the market makers and anti-Trump institutional asset managers joined the bandwagon and decimated the short-sellers, because no matter what people say, in the end they care about their jobs and pockets.

On November 9, by around 02:30 AM New-York time, the Dow Jones index was down by more than 800 points and Nikkei 225 was down by roughly 5%. Less than 24 hours later, the Dow index was up by more than 1,000 points. This swing was as big as in the swings in the midst of the 2008 financial crisis. It illustrated how much pressure had been built up.

The USD as well as US stocks have little reason to keep rallying. We further discuss this in this week’s Global Investment Strategy (GIS) publication.

After the US elections, many who have studied political science in various universities around the world have become disheartened, as they believe their degrees and knowledge to be impractical. Almost all political scientists have missed both the BrExit and US elections.

Many finance and economics graduates have had similar feelings of disappointment since the 2008 financial crisis. Oxford University’s Philosophy, Politics & Economics—PPE—program combines all three fields into a single degree. It is among the oldest and most respected for a reason. These subjects are inseparable.

Much like Oxford’s PPE faculty, Donald Trump’s presidency/election has Philosophical, Political and Economic consequences. They are intertwined with significant investment implications for all market participants across various asset classes.

Philosophical: If Donald Trump can simplify US rules & regulations, trim and restructure various federal government agencies, cut taxes and streamline the tax codes, improve America’s infrastructure, withdraw from various foreign wars/conflicts, and keep America’s real GDP growth at around 3%, contemporary Liberalism will be in deep trouble. As argued in a previous publication, it is important to understand what we mean and imply by “Liberalism” and how its definition has evolved over the last several decades. People who don’t pay enough attention to these concepts are usually confused.

Political: China now needs Russia as much as Russia needs China. This is a major change. Before Donald Trump, Russia was the poor and confused cousin. Saudi Arabia and Qatar are now on their own, caught between Iran, Russia and Israel. This is positive for oil prices. See our previous Brief Note on oil.

Russia’s role could soon become incredibly important unless ...

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