Could President Trump be the economic Robin Hood for the United States giving pain to the rich and then providing benefits to the poor? Let me explain. It’s interesting with tariffs being imposed that the world is selling down U.S. stocks, the world is actually helping President Trump to lower interest rates. What do I mean by that?
So, when the rich sell down their stock positions, they move to cash. Or as we say, “A flight to quality”. They move to U.S. Treasuries, which is a safe investment. So, now treasury prices are going up and interest rates are going down. It’s an economic principle. Treasury prices go up, interest rates go down. So, what’s crazy about this is that the money managers around the world who are selling down U.S. stocks are actually helping President Trump to lower interest rates, in the long run. Who benefits from that?
Well, what happens is you’ll have cheaper car loans in the future. You’ll have lower mortgages to buy homes. You’ll have more money available, and it gives a jolt to the economy that helps the regular individual person in the United States, not necessarily rich, but it helps the regular individuals. It brings down the price of goods. We have lower interest rates.
And if you have lower interest rates, the cost to produce these goods when the businesses production loans are less. In addition to that, if the global community is talking about pushing the U.S. into recession, then the Fed chairman Powell and the Fed group, the Federal Reserve, will look at that and say, “Oh, there’s a possibility of a recession.” And then they in fact will lower rates.
They’re playing into President Trump’s hands because he’s a real estate tycoon. He likes lower interest rates. With the “Drill Baby Drill” concept he’s also causing fuel prices to drop in value. Who does that help? That helps the average individual. Now, in addition to that, if The FED lowers interest rates, that’s going to be a jolt to the economy and, actually, help the stock market rally. And that’s going to happen in May. May is kind of the “critical month”.
The best earnings season for the year is July. So, my expectations is the market will recover between May and July. I also believe there will be a bounce from this tariff negotiation with other countries. The advantage for that is it, actually, lowers prices of goods for both countries involved in this tariff negotiation. And that’s a benefit to the average individual. It brings down prices and it lowers inflation.
There’s one more crazy concept that the world is playing into President Trump’s hands, right now. Because the global managers are selling, the US dollar is dropping in value against other currencies. In the long run, that’s going to benefit the United States. How does it do that? It’s going to do that because now the US dollar is cheaper “against” foreign currencies. That’s going to cause an “export explosion” for the United States goods. We will have the cheapest goods on the planet.
Let me give you an example of how that works. Let’s say you’re Mercedes and you’re building a car and you need to get nuts and bolts. You can, either, buy those nuts and bolts from Nippon Steel in Japan or you can buy them from US steel. In the United States. So, what does Germany do? What they do is they compare the “EURO” against the “Japanese Yen” and the EURO against the “United States Dollar”.
Basically, they see where they can buy the most nuts and bolts to help produce their cars. And if the US dollar is weak? Presto bingo that creates an export explosion for the United States. They will buy the nuts and bolts from the United States because they can get more nuts and bolts because the US dollar is cheaper against the EURO.
So, it’s crazy, but right now the global. Community of money managers are playing into President Trump’s hands. They’re forcing the US dollar down. They’re creating the stock market to sell down, causing treasuries to go up and prices and yields to drop.
In conclusion, I believe May is the most critical month. That is when the Fed meeting happens the first week of May. That is also when the tax bill could be approved. If the tax bill is approved and corporate rates are cut from 34% down to in the 15% range? That all of a sudden makes American companies competitive against China companies. The United States currently has one of the highest corporate rates on planet earth. So, if you have those two events, I believe the stock market will rally in May.
One more thing. I believe July is the strongest “earnings month” of the year. It reports on the “Spring Thaw” of April, May and June. Why is that critical? Because of when the Spring Thaw occurs. Then you have houses being built. You have roads that are now passable, and so businesses brisk in that quarter. July is typically one of the strongest earnings months for the year and that also helps corporations. So, it is possible that President Trump may be the “Economic Robin Hood” for the United States. There’s a little bit of pain for the rich, but it will benefit the poor and the average American in the United States. It’s also crazy that the world is, actually, playing into President Trump’s hands.
Joe Cantu is Chief Investment Officer of Cantu Tactical Wealth Management. He is a West Point graduate in engineering and economics with 36 years at three of the largest Wall Street firms in the retirement money management profession. Concurrently, for 14 years he taught night college course in “High Net Worth Retirement and Estate Planning”.
DISCLOSURES
Personal opinions are for educational and entertainment purposes only and do not constitute a recommendation. Investing has a risk of loss, and you should consult with your own advisors about any financial decisions. Cantu Tactical Wealth Management and Joe Cantu are a fiduciary firm and registered investment advisor in the States of California, Florida, Georgia and Texas, providing pure independent advice and money management.
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