There are many investors that agree the economy in 2017 is going to accelerate with Donald trump as the president. Some very smart investors are now saying that if this does actually go ahead, and it does look likely it’s going to have very serious impacts on current interest rates, the dollar and inflation.
A lot of investors are asking what we should do, and where you should invest once inflation comes back to haunt us. Long term rates reflect a supply and demand for money. Lately yields have been rising and that could mean the Federal Reserve are going to tighten and Donald Trump is actually going to help the economy start growing again.
A lot of investors still think that right now bonds have further to fall. Even after bonds have taken a real battering. That means rates have a very very long way to rise.
The US dollar is another vehicle that has been doing very well lately. If the fed really is going to raise interest rates, that means that foreign investors are going to start to put their money into the US, and take advantage of the rates, and rate rises. And this would mean the US dollar, already on and upward trajectory will probably just keep going higher, and hit new highs. Current ETF’s that track the current US dollar moves, only seem to suggest more signs of ultimate strength for the US dollar. Time will tell.
Under a Trump administration, he is already hinting things like “make America Great again” and a pillar of that is the return to inflation. Looking at the monthly CRB index or commodities as a whole, you can see the last 10 years, it’s obvious we were in deflation.
In recent months it has been trading in a complex sideways narrow channel. What caught traders attention was that the action or pattern is sometimes referred to as a cup and handle pattern, which 85% of the time a reliable signal that the stock or index is about to rally or make a possible move higher or experience more buying power.
When you also look at the fundamentals, the charts seem to suggest that interest rates are going to head higher, the US dollar will continue to rally higher, and we will see inflation come swiftly. So if these three things are actually going to happen, Trump talking about making the USA great again, could actually come to fruition. If all this played out, the economy and certain industries would get their certain groove back, in a big way. That is why you need to keep watching these three very important charts as we head into 2017. They could present some very good opportunities, especially with Obama out of office.
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