Market Direction: BULLISH alert
issued 11/10/2016
The specter of increased trade protectionism was raised on Wednesday, following a report suggesting President Donald Trump may announce a withdrawal from the North American Free Trade Agreement.
According to Reuters, which cited two Canadian government officials, Canada is increasingly convinced that President Donald Trump will announce that the U.S. will exit Nafta. The trade pact is currently being renegotiated with the latest round of talks scheduled for later this month in Montreal.
A pullout is seen as potentially disruptive to stock markets, which have been in rally mode for years, and haven’t experienced a pullback for a nearly unprecedented length of time.
“If the U.S. pulls out of Nafta, I do think that represents a definite risk to markets,” said Liz Ann Sonders, chief investment strategist at Charles Schwab.
Sonders distinguished between Trump wanting to withdraw and the U.S. actually doing it, noting that such a fundamental shift in policy would likely need congressional approval, which could be difficult to obtain given how controversial such an initiative would likely be. “There could be an announcement that we’re pulling out, and then there’s what actually has to happen for it to occur. Either way there will be shock waves” in the market, she said.
Trump has been vocal about adhering to an America-first trade policy. In November, he said the U.S. “won’t be taken advantage of any more,” and that the U.S. wouldn’t enter into multilateral trade agreements that “tie our hands.”
The risk of protectionism has investors edgy, with some citing it as one of the primary risks facing equities in 2018.
BlackRock’s Geopolitical Risk Indicator is currently at its highest level since March 2015, and Richard Turnill, the firm’s global chief investment strategist, said he was “most worried about the potential for a protectionist U.S. approach to trade,” which he said “could shake up global growth and earnings prospects—and call into question our economic outlook.”
He added, “any breakdown in North American Free Trade Agreement talks would be an ominous sign for global trade.”
Read more: Forget North Korea, this is the biggest political risk facing stocks in 2018
U.S. stocks fell slightly on Wednesday after the report, with the S&P 500 SPX, -0.11% down about 0.1% and the Dow Jones Industrial Average DJIA, -0.07% off 0.1%. Both the S&P and the Nasdaq Composite Index COMP, -0.14% snapped a six-day losing streak, marking the first down session for the indexes of 2018. There was more pronounced selling pressures in exchange-traded funds tied to Canada’s and Mexico’s stock market.
The iShares MSCI Mexico ETF EWW, -2.19% closed down by 2% while the iShares MSCI Canada ETF EWC, -0.99% lost 1.1%.
Both Mexico and Canada are seen as having a higher effect from the U.S. leaving Nafta, as they benefit from free trade with the world’s largest economy. However, abandoning the agreement is seen as adding another element of political uncertainty to the markets. Worries about trade in North
America come amid tough trade talks with China, the world’s second-largest economy, which could weigh on multinational companies that do business across the globe.
“The legal and political implications of [the U.S. withdrawing from Nafta] are complicated but there is little question that business and investment uncertainty would rise,” wrote Erin Browne, head of asset allocation at UBS Asset Management. She added that protectionist trade policies were “perhaps the largest global risk related to China.”
$tockMarketDirection proprietary model is currently BULLISH. We strongly encourage you to monitor positions closely, exercise proper money management strategies and follow us at $tockMarketDirection for ALERTS we may issue advising a change in the current market direction. Stay tuned and follow us. If you have a testimonial or comment of how this website has helped you we would like to know, email us. Share with a friend.
Could NAFTA derail the bull market...
The specter of increased trade protectionism was raised on Wednesday, following a report suggesting President Donald Trump may announce a withdrawal from the North American Free Trade Agreement.
According to Reuters, which cited two Canadian government officials, Canada is increasingly convinced that President Donald Trump will announce that the U.S. will exit Nafta. The trade pact is currently being renegotiated with the latest round of talks scheduled for later this month in Montreal.
A pullout is seen as potentially disruptive to stock markets, which have been in rally mode for years, and haven’t experienced a pullback for a nearly unprecedented length of time.
“If the U.S. pulls out of Nafta, I do think that represents a definite risk to markets,” said Liz Ann Sonders, chief investment strategist at Charles Schwab.
Sonders distinguished between Trump wanting to withdraw and the U.S. actually doing it, noting that such a fundamental shift in policy would likely need congressional approval, which could be difficult to obtain given how controversial such an initiative would likely be. “There could be an announcement that we’re pulling out, and then there’s what actually has to happen for it to occur. Either way there will be shock waves” in the market, she said.
Trump has been vocal about adhering to an America-first trade policy. In November, he said the U.S. “won’t be taken advantage of any more,” and that the U.S. wouldn’t enter into multilateral trade agreements that “tie our hands.”
The risk of protectionism has investors edgy, with some citing it as one of the primary risks facing equities in 2018.
BlackRock’s Geopolitical Risk Indicator is currently at its highest level since March 2015, and Richard Turnill, the firm’s global chief investment strategist, said he was “most worried about the potential for a protectionist U.S. approach to trade,” which he said “could shake up global growth and earnings prospects—and call into question our economic outlook.”
He added, “any breakdown in North American Free Trade Agreement talks would be an ominous sign for global trade.”
Read more: Forget North Korea, this is the biggest political risk facing stocks in 2018
U.S. stocks fell slightly on Wednesday after the report, with the S&P 500 SPX, -0.11% down about 0.1% and the Dow Jones Industrial Average DJIA, -0.07% off 0.1%. Both the S&P and the Nasdaq Composite Index COMP, -0.14% snapped a six-day losing streak, marking the first down session for the indexes of 2018. There was more pronounced selling pressures in exchange-traded funds tied to Canada’s and Mexico’s stock market.
The iShares MSCI Mexico ETF EWW, -2.19% closed down by 2% while the iShares MSCI Canada ETF EWC, -0.99% lost 1.1%.
Both Mexico and Canada are seen as having a higher effect from the U.S. leaving Nafta, as they benefit from free trade with the world’s largest economy. However, abandoning the agreement is seen as adding another element of political uncertainty to the markets. Worries about trade in North
America come amid tough trade talks with China, the world’s second-largest economy, which could weigh on multinational companies that do business across the globe.
“The legal and political implications of [the U.S. withdrawing from Nafta] are complicated but there is little question that business and investment uncertainty would rise,” wrote Erin Browne, head of asset allocation at UBS Asset Management. She added that protectionist trade policies were “perhaps the largest global risk related to China.”
$tockMarketDirection proprietary model is currently BULLISH. We strongly encourage you to monitor positions closely, exercise proper money management strategies and follow us at $tockMarketDirection for ALERTS we may issue advising a change in the current market direction. Stay tuned and follow us. If you have a testimonial or comment of how this website has helped you we would like to know, email us. Share with a friend.
The all-time highs since our initial
recommendation to go LONG
this market. Here is how the markets have performed:
Stock Market
Direction Recommendation (9/21/2017)
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Dow
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up 3,080.55 points a 13.78% gain
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1/9/18
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Nasdaq
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up 758.45 points a 11.81% gain
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1/9/18
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S&P 500
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up 258.54 points a 10.34% gain
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1/9/18
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Related Link: http://www.stockmarket-direction.com/
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