The US Presidential elections threw markets a major league curveball this week. As results started to trickle in, and the tide turned in favor of Mr. Trump, the US Dollar and stock market futures fell dramatically… but by the next day, they both reversed course and continued to climb through the rest of the week. This left all asset classes other than gold stocks and long term treasury bonds in the black.
Currencies, commodities, and major stock indexes were all higher this week, while bonds were mixed. Bucking the overall uptrend, gold stocks were the biggest loser this week, falling 12.7%, while copper and palladium made the biggest gains, rising 16.85 and 15.5% respectively.
Bitcoin was the strongest currency, gaining 7.5%, followed by the US Dollar, which gained 5.4%. The weakest currencies were the Chinese Yuan and Japanese Yen, which rose 1.8% and 1.9% respectively. Bonds showed a preference for shorter maturities this week, with the long term TLT falling 2.4%, while short term SHY gained 5.0% and USD cash rose 5.4%.
The major stock indexes were all up, led by the Dow Jones Industrials, which gained 11.0%. Japan rose the least; the Nikkei 225 was up 4.7%. Gold stocks were the exception, as the HUI collapsed 12.7%, falling to it's lowest level since March.
As mentioned earlier, commodities were all higher, led by copper and palladium, which rose 16.8% and 15.5% respectively. Silver managed a respectable 7.0% gain, and crude oil snapped its losing streak to close 3.8% higher. Platinum added 2.3% to close at 24.5 grams/oz, still far below the gold parity price of 31.1 grams.
My take is that investors are expecting Trump's promised reductions in tax rates and big spending on infrastructure and military expansion to be good for stocks and boost demand for strategic commodities like copper, palladium and silver. But they are nervous about the growth of deficits and long term debt that these programs imply. If we also get the promised import tariffs and reduced participation in global trade agreements, we could see a reversal in the stock market (which is already grossly overpriced) and a move away from government-issued currencies toward Bitcoin and precious metals, which are much more difficult to confiscate or "bail-in" if things head south.
Click for PDF version
