US Eschews Multilateralism in Favour of America First Policy

US Commerce Secretary Wilbur Ross launched a scathing rebuke against IMF head Christine Lagarde who accused the US administration of protectionist measures. Wilbur Ross, the billionaire investor whom Trump tasked with heading the Commerce Department, has pooh-poohed comments by Lagarde and other European organizations accusing the Trump White House of pursuing protectionist measures. In his defense of current US policy, Ross pointed to Japan, China, and Europe as examples of staunch protectionist economic systems. Given the economic realities, Ross has a certain degree of credibility. The US is currently in deficit to the tune of $500 billion, and the beneficiaries of this are Japan, China and Europe. For his part, Commerce Secretary Ross does not believe that the US should remain in deficit while other nations enjoy trade surpluses and continue accusing the US of adopting protectionist measures. The multilateralism that Lagarde touts appears to fly in the face of reality, given the high tariffs and barriers to free trade that are inherent to non-member countries of the European Union et al. According to Wilbur Ross, ‘… We also have trade deficits with all three of those places… But in fact what they practice is protectionism.’ The president of the World Bank, Jim Y. Kim and the head of the IMF, Christine Lagarde are likely to push for multilateralism and warn against protectionism at a series of meetings in Washington DC this coming week.

TPP is Dead but New Bilateral Agreement with Japan on the Table

For its part, the Trump administration will be reducing US contributions to the World Bank and to the United Nations. This is part of a series of cost-cutting initiatives aimed at putting America’s interests first, while ensuring that other nations contribute their fair share to the UN, NATO and the World Bank. The US is currently engaged in detailed negotiations with Mexico and Canada to renegotiate the terms of NAFTA, and the US is attempting to reduce the trade deficit with the world’s second-largest economy, China. After the United States pulled out of the Transpacific Partnership (TPP), the country is looking to Japan for a bilateral trade agreement. The US is going to hold Japan to various concessions it has made in draft agreements on a new trade policy.

Back on the mainland, the US is facing increasing skepticism about the efficacy of Trump Trade. As it stands, there is doubt that Americans are feeling as confident as they were when Trump was elected. Falling consumer prices indicate that consumers are spending less, as evidenced by declines in automobile sales. The postelection surge that characterized Trump’s victory has faded. Now, naysayers are claiming that Trump’s promises of fiscal expenditure, deregulation and tax reform are not working. Consumer prices retreated 0.1% in March 2017, in sharp contrast to forecasts of an increase in consumer expenditure. Indeed, as much is evident on the stock markets where multiple successive sessions of declines have resulted in a risk-off approach to equities. This is also the fifth week of declines for yields on US treasuries. That the inflation figure missed forecasts is deeply concerning. Retail sales were equally disappointing, and they fell for the second month in a row. This is all taking place against a backdrop of increasing interest rates to prevent the US economy from overheating. Nonetheless, there are just as many economists who believe the data is cyclical and a turnaround is in the offing. Evidence of this is rising wages and falling unemployment.

Trading Opportunity #1 – Shorting the Dow Jones Industrial Average

The Dow Jones Industrial Average is currently trading at 20,453.25. The index is down 0.67%, or 138.61 points, for a year to date return of just 3.49%. The 1-year return is around 17.24%. On Thursday, 13 April, the 30-member index had 28 members down and just 2 members up. Over the past 1 month, we have seen the Dow falling from 20,934.55 on 16 March to its current level (-500 points) on the back of successive declines as Trump Trade fades. As a binary options trader, the trend is your friend, and in this case it’s clearly bearish. The worst performing stocks on the Dow include J.P. Morgan Chase & Company (JPM), Exxon Mobil Corporation (XOM), Chevron Corporation (CVX) and Caterpillar Incorporated (CAT).

That these energy and banking companies are dragging the Dow lower is cause for concern. The best-performing stocks on the Dow (Thursday, 13 April) include the Walt Disney Company (DIS) and Visa Incorporated (V). The main reason markets are undergoing such volatility is the geopolitical tensions vis-à-vis Syria, North Korea, China and Russia. Over the short-term, we can expect further weakness, but long-term the fundamentals of the US economy are sound and this should reflect in the Dow Jones.

Trading Opportunity #2 – Crude Oil Prices on the Mend?

Over the past 7 days, WTI crude oil has traded in a tight range between $53 and $53.40 per barrel. The recent performance of crude oil has been bearish, but we are in the midst of a slow uptrend. The weekly forecast for West Texas Intermediate oil is largely positive for Monday, 17 April through Friday, 21 April. Most of the losses that were suffered during March were recovered in mid-April, despite the drop in oil prices after the weekly inventory levels were announced.

As a binary options trader, it’s tough to gauge the current direction of price movement, although some analysts believe we are in the midst of an oil price decline. We could be moving towards the current support level of $51.50 per barrel, if the price moves below the critical $51.66 target. On the upside, there is likely to be resistance at around $53.94 per barrel, and this has been a critical level for quite some time. Short-term bearish movements characterize the WTI crude oil market. The long-term trend however, remains positive.

Trading opportunity #3 – Goldman Sachs Stock Heading South

The past couple of weeks have been particularly difficult for banking and financial stocks. This is evident on the Dow Jones, and the S&P 500 where banking stocks like Bank of America (BAC), Wells Fargo (WFC) and Goldman Sachs (GS) have come in for a beating. For example, the Goldman Sachs Group Inc. (GS) is currently trading $2.43 lower, down 1.08% at $223.32 per share. Over the past 5 days, the stock has declined from $228.50 per share, or 2.39%.  Despite being browbeaten by speculators and traders, GS has beat forecasts in each of the previous 4 fiscal quarters. For binary options traders, it’s important to follow the updates from within the company and with speculative sentiment on the bourses.

It is worth pointing out that one of the Trump administration policy advisers, Gary Cohn sold $5 million worth of shares in Goldman Sachs on the very same day that the Trump administration announced a regulatory overhaul of the banking sector. TheStreet still recommends GS as a buy, and this makes sense given the downward price revision on what is fundamentally a strong stock. Banking stocks may be trading bearish, but they are long-term investor friendly. It comes as no surprise that the prices of big bank shares are trending bearish, but the most important announcements will be available on Tuesday, 18 April when Goldman Sachs and Bank of America report their latest quarterly earnings. This is something you will want to watch out for in binary options trading.

Trading opportunity #4 – The Cable is Bullish

All the doom and gloom in financial markets has done wonders for the GBP. The beleaguered sterling has found a short-term respite with volatility in the EUR, and a weaker USD as Trump Trade fades. The recent performance of the sterling is laudable. It is currently trading at 1.2517 against the USD, with marginal gains and a positive short-term trajectory. Of course, part of the reason for the strong performance of the sterling is the uncertainty in France, and geopolitical tensions in Syria, North Korea, and between the US and Russia. Sabre rattling has weakened the USD somewhat, and weak CPI data and poor retail sales figures have not helped the cause. As a result, the GBP is gradually climbing higher, and testing its 50-day moving average and its 200-day moving average figures. As a binary options trader, it makes sense to go long on the GBP.