Earnings, the Fed, the fundamentals, and the President. This is what is facing those trading under Trump. Uncertainty is now the buzz word for traders, and how could it not be? A U.S. president can rattle world markets with the stroke of a pen or a misplaced word. The U.S. Dollar ($USD) fell against the yen ($JPY) following President Trump’s executive order attempting to place a 90-day travel ban to the U.S. by citizens of some Middle Eastern countries.
The reality of a U.S. president’s influence on world affairs and markets is not new, of course. But, we seemed to have entered unprecedented times. President Donald Trump’s short time in office has shown how unpredictable he can be compared to his predecessors. That volatility in politics easily transfers to volatility in the markets. Making an already difficult practice even harder for those trading under Trump.
This reality is also not new. As far back as the Great Recession, global markets have struggled through periods of uncertainty. The big question is: how do traders deal with an uncertain Presidential “trump card” hanging over the market?
Normally, one looks at all the factors currently affecting the market to arrive at an understanding. We recently discussed how winning more than losing is all about moving the odds in your favor.
So, in this time and place, we have the unknown in President Trump. We also have knowns in earnings and economic fundamentals. Looking at these two factors, one could assess the market as being in a fairly solid place, right?
The “knowns” are positive
Earnings have provided a very positive outlook recently. As of January 27, with 34% of the companies in the S&P 500 reporting actual results for Q4 2016, 65% of S&P 500 companies have beaten the mean EPS estimate and 52% of S&P 500 companies have beaten the mean sales estimate.
Economic fundamentals are also bullish. The January Dallas Fed manufacturing survey jumped to 22.1, beating the 15.0 expected and marking the highest level since early 2010. December’s report was also revised to 17.7 from 15.5. The report had spent most of the last two years providing negative figures.
The government may trump everything
Despite the reality of decent earnings and decent economic fundamentals, the market might well be trumped by Trump. It’s looking more at the President’s influence over the world, particularly as it relates to the Fed.
Who can forget the Fed? This group has created more uncertainty in the market in the last decade than any other entity. Change is coming, eventually. Fiscal policy, trade policy, and regulatory policies are all on the table and up for review in the Trump administration. In addition, we can’t rule out seeing significant changes for the Federal Reserve and how it conducts monetary policy.
Where does all this lead us? Why right back to the future of the market trying to determine how we turn the odds in our favor with all the uncertainty in play. One choice is to sit it out, watch, and wait. But, four years is a long time.
How traders can balance it all together
So, if trading under Trump is unavoidable, an alternative approach could be to become a smarter trader. Watch specific markets carefully and ask yourself a question – Which individual markets could flourish under President Trump?
Use trading software that can spot similarly trending markets and utilize artificial intelligence to identify trends before they take off. VantagePoint does just this. It utilizes artificial intelligence to forecast market movements 1-3 days in advance with up to 87.4% accuracy.
With an ever-uncertain presidential cloud looming over the markets, the more reliable tools you have in your corner, the better you position yourself to be profitable.
Become a smarter trader with VantagePoint
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