The most important theme in today’s markets
What market theme is most important going forward?
Is it an
increasingly shaky emerging markets sector, which is being pressured by rising
interest rates around the world?
Is it a falling
U.S. dollar, which is contributing to inflation
concerns here and abroad?
Or maybe it’s the geopolitical
rivalries that are roiling oil markets, generating insecurity
for Russia and heightening trade
tensions with China.
No, I suspect the most important market theme going forward is economic
protectionism and the increasing world wide willingness to utilize trade and
economic relations as blunt tools of statecraft.
This protectionism masquerades as economic
patriotism in Europe and has become a tool
with a political agenda in Asia.
Bolivia
and Venezuela have nationalized resources to advance their agendas, and
Russia has taken
a heavy hand with those who question its nationalization of resources.
The rise in energy and commodity prices have emboldened
countries to control their resources.
The U.S. is hardly exempt, most recently rejecting
Lenovo computers for government purchase and proposing
restrictions on foreign investment. That after rebuffing
CNOOC and de-porting
Dubai.
Protectionism extends to concerns over our borders with Canada
and Mexico,
the latter of which is attracting
corporate interest in the wake of a $2 bln Homeland Security contract.
But wait.
If the U.S. runs trade deficits and trade partners holding dollars cannot use
these to invest in American assets, why
should they continue to hold dollars?
A Russian energy
market priced in convertible
roubles wouldn’t need the dollar.
Maybe that’s why gold has become a
handy alternative to the dollar around the world.
When economic issues are framed in terms of national security in the U.S., in
South America, and in Russia, it is difficult to see how the dollar–and any
assets backed by dollars–can benefit. That means we have to pay higher
interest rates to maintain the value of the dollar, which puts pressure on
housing and economic expansion, which weighs on stocks.
Around the world, national (in)security has trumped free trade: That
is the most important market theme going forward.
Brett N. Steenbarger, Ph.D. is Associate Clinical
Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical
University in Syracuse, NY and author of The
Psychology of Trading (Wiley, 2003). As Director of Trader Development
for Kingstree Trading, LLC in Chicago, he has mentored numerous professional
traders and coordinated a training program for traders. An active trader of the
stock indexes, Brett utilizes statistically-based pattern recognition for
intraday trading. Brett does not offer commercial services to traders, but
maintains an archive of articles and a trading blog at www.brettsteenbarger.com
and a blog of market analytics at www.traderfeed.blogspot.com.
His book, Enhancing Trader Development, is due for publication this fall
(Wiley).