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It’s time Trump stopped eating our lunch. Let our dollar drop Donald!

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By Peter Switzer
 
The next time Malcolm Turnbull telephones the US President it might be an idea for our PM to plea: “Hey, Donald could you stop eating our lunch and do something to make the greenback go higher?” That said, there is an upside from the USA’s depreciating currency, it’s giving the Yanks economic growth and driving up US stocks and given the 259-point gain on the Dow overnight, I reckon we’ll enjoy another good day for stocks today, like yesterday.

Why the optimism?

Well, aside from the Dow’s dramatic push up, markets right around the world breathed a sigh of relief and shot up with the German market up 1.39% and the French CAC rising 1.24%. And here’s why:

  • Insurers stocks rose on reports that damage caused by Hurricane Irma is likely to be less than earlier thought.
  • North Korea did not do another missile test
  • The combined effect of less fear about hurricanes and Kim Jong-un led to a dumping of safe haven assets for something more risky, like stocks.
  • The S&P 500 rose by 1.1% to a record high, showing US investors are not tired of the stocks story in the USA yet.
  • GDP forecast downgrades linked to the impact of hurricane Irma will be pushed up, and
  • Expert stock analysts such as Art Cashin from UBS on the floor of the New York Stock Exchange is telling those who listen to him, and there are plenty, that the Fed won’t raise interest rates this year.

And it’s this last issue that is a problem for Australia and explains why I think the US and Donald Trump is eating our lunch.

What’s the best guide? That’s easy — the Oz dollar at 80.3 US cents this morning and with predictions that it could go as high as 85 US cents!

You see if our dollar is going up in terms of US cents then the US dollar is depreciating as ours is appreciating. And that means the Yanks get the economic growth that we need and that’s eating our lunch in terms of what we produce, the income that results, the jobs that follow and the higher stock prices that don’t result because our growth is lower than expected.

But why blame the US President for eating into our growth and stock market rising potential?

It’s simple — he has overpromised and under-delivered.

His presidency promised so much — less regulation, tax cuts and infrastructure spending — but instead of getting on with the job he has kept playing petty politics with the media, his own staff and nutcases like Kim Jong-un.

And worse than that, he’s playing unproductive politics with his own Republican Party and the Congress they control.

Experts looked at his healthcare reform failure and made ominous predictions of what this might mean going forward but I hoped the man who wrote the book, The Art of the Deal, was playing a wise game to eventually pull off a great coup. However, at this stage it looks more like a whole lot of hot air.

Fortunately, Wall Street retains faith in their President and I hope I’m wrong but because he’s played a delayed and very slow game our dollar is too high, our growth is slower than expected and our stock market is locked in a trading range refusing to beat the higher 6000-level on the S&P/ASX 200 Index.

Sure, Kim Jong-un has not helped, but Donald Trump’s failings have not helped US economic growth and the strength of the greenback, which has backwashed onto our economy.

If he was on song, the US would be growing faster, US interest rates would be higher, the greenback would be stronger and our little Aussie bleeder would be more like 70 US cents rather than 80 US cents.

When Donald’s act is together and he starts sinking his teeth into the big promises he got elected on, then our dollar will drop and our economy, which is doing OK, will step up a gear and our stock market will too.

The market rise we might see today is OK but it would be bigger if our dollar was weaker.

Published: Tuesday, September 12, 2017


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