Did The Market Get The “TRUMP” Trade All Wrong?

Posted by on January 27, 2017 12:10 am
Tags:
Categories: Uncategorized

I have to admit to something. While we successfully predicted the Trump Presidency as far back as May of 2016  Donald Trump Will Be The Next President, we did not anticipate the extent of the rally since his election.

Our premise was simple. In his pre-election campaign Mr. Trump went after the FED and their artificially low interest rates.  At that time, and in no uncertain terms, he had suggested that he would force the FED to normalize interest rates (aka higher rates).

You know the drill. Higher rates mean lower stock market prices. Particularly, considering today's bubble level valuations.

Apparently, most investors don't care about any of this. The "HOPE" trade was on and the market surged higher. In anticipation of pro-business policies, lower taxes and stronger growth ahead. Despite massive structural problems (zero interest rates and massive debt) that most likely will prevent that from happening.

Who is right and who is wrong?

Well, most market pundits would tell you that the market is always right. Perhaps, but on certain occasions the same logic can and does backfire. As was the case in 2000 and 2007.

There is another possible explanation behind the recent rally. Since the election night the Bank of Japan has been aggressively devaluing the Yen.  Just take a look at how closely the S&P has tracked the USD/Yen

Please note something of late. The pair has diverged. Suggesting trouble ahead.

How much longer can this go on? Did the market get it right or wrong? If wrong, what happens next? If right, how much further can this rally go?

These are the questions investors should be seeking answers to today. .

If you would like to find out exactly what happens next based on our Timing and Mathematical work, please Click Here.