As equity markets here and across the world struggle to put together any sort of bounce, there is a much bigger underlying trend playing out across the globe you need to know about.
Perhaps this is what the stock market is worried about?
Overnight, US stocks fell heavily. Both the Dow and S&P 500 tanked 2.6%. The Aussie market, after falling 1% yesterday, is set for further declines today.
Yesterday, I showed you a chart of the ASX200 with an important line of support around 5,650 points. It looks like we’re heading back down to test that support again today. Let’s see what happens…
The latest sell-off is apparently due to investors having a rethink about the US/China trade wars. Maybe. But maybe we’re just at the end of the global business cycle and the economy is now slowing down? As a result, stock prices are reacting to the prospect of slower earnings growth ahead.
Supporting this argument is a ‘flattening’ of the US yield curve. This happens when long-term bond yields decline at the same time as short-term yields rise or remain static. The ‘curve’ of the yield (from short-term to long) therefore becomes flatter. A flatter yield curve signifies a weakening economy.
It’s a result of a still hawkish Fed (meaning it wants to continue raising rates) while the market sees economic growth slowing.
While stocks may not like it, at least gold does!
I mentioned recently that gold looks like it is bottoming out. I said a move above US$1,240 an ounce would confirm that. Well, we’re getting close to the mark, folks. Gold rallied overnight. As I write it trades at US$1,238 an ounce. One more decent session and it will break out to the highest level in nearly six months.
The chart below hasn’t updated to show the latest gains, but you get the picture. A close above US$1,240 an ounce would be bullish.
And given that there is increasing evidence of a global economic slowdown and the potential for the Fed to do an about face on interest rates, there are fundamental reasons to like gold here.
There is also a much deeper reason. It relates to the bigger underlying trend I pointed out at the start. This trend involves a worldwide shift away from the tenants of ‘globalism’ and back towards the principles of national sovereignty.
You’re seeing this in the rise of Trump, Brexit and more recently, the riots in Paris. On the surface, the riots represent a good old French tax revolt. But it’s much more than that.
It’s a protest against the costs of climate change being imposed on the working and middle classes. It’s a protest again President Macron being a puppet of the ‘elites’.
The mainstream media (MSM) portray this is as a move towards ‘nationalism’, a pejorative word that comes with undertones of racism and intolerance.
But that’s a narrow and biased view. The MSM is owned by the elites. It is therefore a mouthpiece and propaganda arm for the elites. Of course they will mischaracterise what’s actually going on in the world to suit their needs.
If you look at it simply and objectively, it’s actually quite clear what is happening. In short, globalism is a movement designed to centralise power and exert control. It is control by elites, exerted via global institutions and captured governments, like Macron’s.
Britain’s Theresa May is captured too. Her role was to make Brexit as difficult and as ugly as possible. She’s created a nightmare for the UK and is now under pressure again, as the ABC News reports:
‘British Prime Minister Theresa May’s Government has been found in contempt of Parliament for refusing to release its full legal advice on Brexit, underlining the depth of opposition among politicians to her deal on leaving the European Union.
‘“Today’s finding of contempt is a badge of shame for this Government. It is of huge constitutional and political significance,” Keir Starmer, the Opposition Labour Party’s Brexit spokesman, said after the vote.
‘“Never before has the House of Commons found ministers in contempt of parliament.”’
Politicians don’t like it when the people get in the way of their grand plans. Just look at Hillary Clinton…
‘Nationalism’, or political populism as it’s also referred to, represents a decentralisation of power. As an advocate of libertarianism, The Rum Rebellion supports this movement. The more that political and corporate power is centralised, the more opportunity there is for corruption and abuse of that power. As a result, there is less individual freedom.
Just look at China, a communist system with a centralised power/political structure. Not much personal freedom there…
Decentralised political systems, on the other hand, offer greater levels of personal freedoms. However, they are still susceptible to a creeping globalist agenda, as has happened across the Western world over the past century.
I’ve written about this trend in my investment advisory, Crisis & Opportunity over the past few months. The research project concludes in this month’s issue, where I discuss the long-term investment implications of such a shift.
Make no mistake, the investment implications will be huge. We’re talking about the biggest political/financial shift in the post-war era. But we are only at the start…
The US/China trade war is a part of this conflict. Clinton sold the US out when it allowed China into the World Trade Organisation (WTO) in 2001. China’s entry was conditional on it ‘liberalising’ its economy, which means making it more like its Western trading partners.
Classical liberalism is the antithesis of communist rule. China was never going to live up to its promises and remain a one-party dictatorship.
Who were the main beneficiaries of China’s entry into the WTO? The Chinese political establishment and the global multinationals that set up shop there.
That’s why Trump is the ‘Tariff Man’ (as he called himself in a tweet today). He wants to level the playing field after China reneged on the deal it made back in 2001.
This move from globalism to populism is evident in Australia today too. I don’t think too many people view what is happening in our country through this lens though. But it is happening. Tomorrow, I’ll explain how…
Editor, The Rum Rebellion