Bulletin
Investor Alert

New York Markets Close in:

Corrections Archives | Email alerts

Feb. 14, 2017, 7:39 p.m. EST

What investors ought to do after Trump fails to criticize Abe’s policies

Look toward U.S. and Asian stocks, but be wary of silver and gold

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    Dow Jones Industrial Average (DJIA)
  • X
    SPDR S&P 500 ETF Trust (SPY)
  • X
    PowerShares QQQ Trust Series 1 (QQQ)

or Cancel Already have a watchlist? Log In

By Nigam Arora


Getty Images
U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe.

(Corrects story originally published Feb. 13, 2017, to say that Japan, China and South Korea have trade surpluses, not deficits, with the U.S.)

Donald Trump has accused countries including China and Japan of manipulating their currencies and running large trade surpluses with the U.S.

Investors in Asia were on edge leading into the meeting between Japanese Prime Minister Shinzo Abe and Trump late last week. The economic policies of Abe, known as Abenomics, rely in part on a weak Japanese yen and exports to the U.S.

There is a clear conflict between Abenomics and Trump's policies.

The news was that the meeting between Abe and Trump ended with handshakes, hugs, golf and a statement by Trump that he supports Japan “100%.” But the real news here is that there was no mention of a weak yen and Japan running a trade surplus, creating, of course, a deficit for the U.S.

Trump vs Abe

There is a clear conflict between Abenomics and Trump's policies.

In 2016, Japan ran a $68.9 billion trade surplus with the U.S., ranking second after China. So it appears that Abenomics has triumphed over Trump's policies. Trump might have been influenced by geopolitical considerations to forgo the flashpoint of a weak yen and a trade deficit for the U.S. While Trump and Abe were meeting, North Korea challenged them by launching a ballistic missile in the Sea of Japan.

Markets are responding. This shift in Trump's policies is good for U.S. stocks, good for Japanese and Asian stocks, good for the dollar, and bad for gold and silver.

The reaction in U.S. stocks is best illustrated in the annotated chart of Dow Jones Industrial Average /quotes/zigman/627449/realtime DJIA -0.0045%  futures. Please click here for the annotated chart of DJIA futures.

The initial reaction is selling pressure on the yen and buying pressure in all four benchmark U.S. stock ETFs, S&P 500 ETF /quotes/zigman/714403/composite SPY -0.09% , Nasdaq 100 ETF /quotes/zigman/105934/composite QQQ -0.03% , Dow Jones Industrial Average ETF /quotes/zigman/588977/composite DIA +0.03% and Small-Cap ETF /quotes/zigman/1476838/composite IWN -0.20% .

Another initial reaction is that the “smart money” all over the world is selling gold.

In the U.S. selling pressure can be seen in the gold ETF /quotes/zigman/41663/composite GLD +0.02% , silver ETF /quotes/zigman/417006/composite SLV +0.06% , gold miner ETF /quotes/zigman/70614826/composite GDX -1.34% , junior gold miner ETF /quotes/zigman/70614838/composite GDXJ -0.59% and leveraged gold miner ETF /quotes/zigman/59392505/composite NUGT -4.07% . And buying is seen in inverse leveraged gold miner ETF /quotes/zigman/76435055/composite DUST +4.10% .

It is noteworthy that export-dependent stocks that have been at risk due to Trump's policies are now less at risk. Those include Apple /quotes/zigman/68270/composite AAPL -0.15% , Boeing /quotes/zigman/220026/composite BA -0.34% , Broadcom /quotes/zigman/65717763/composite AVGO -0.20%   International Business Machines /quotes/zigman/230066/composite IBM +0.21% , 3M /quotes/zigman/302497/composite MMM +0.75% , Nike /quotes/zigman/235840/composite NKE +0.84% , Nvidia /quotes/zigman/80597/composite NVDA -0.32%  and Wynn Resorts /quotes/zigman/88601/composite WYNN -1.06%

The South Korean market would usually have been expected to fall today, but selling has been contained on optimism over a shift in Trump’s policy. South Korea also runs a large trade surplus with the U.S. Of interest here are the Korea ETF /quotes/zigman/22227/composite EWY -0.30%  and Korea Fund /quotes/zigman/536019/composite KF +0.20% .

What to do now

This is a positive development for the long run. Consider holding good long-term positions. However, Trump is unpredictable, and the U.S. market is overbought. For this reason, it is prudent to patiently wait for a pullback to start any new positions.

Disclosure: Subscribers to The Arora Report may have positions in the securities mentioned in this article or may take positions at any time. All recommended positions are reviewed daily at The Arora Report.

Nigam Arora is an investor, engineer and nuclear physicist by background, has founded two Inc. 500 fastest-growing companies, is the developer of the adaptive ZYX Global Multi Asset Allocation Model and the ZYX Change Method to profit from change in trading and investing. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be reached at Nigam@TheAroraReport.com

Click to Play

North Korea missile launch poses challenge for Trump

/quotes/zigman/627449/realtime
US : DJ-Index
20,742.07
-0.93 -0.0045%
Volume: 58.05M
Feb. 22, 2017 10:23a
loading...
/quotes/zigman/714403/composite
US : U.S.: NYSE Arca
$ 236.28
-0.22 -0.09%
Volume: 7.97M
Feb. 22, 2017 10:23a
loading...
/quotes/zigman/105934/composite
US : U.S.: Nasdaq
$ 130.41
-0.05 -0.03%
Volume: 2.56M
Feb. 22, 2017 10:23a
loading...
/quotes/zigman/588977/composite
US : U.S.: NYSE Arca
$ 207.14
+0.07 +0.03%
Volume: 429,090
Feb. 22, 2017 10:23a
loading...
/quotes/zigman/1476838/composite
US : U.S.: NYSE Arca
$ 121.65
-0.25 -0.20%
Volume: 71,584
Feb. 22, 2017 10:22a
loading...
/quotes/zigman/41663/composite
US : U.S.: NYSE Arca
$ 117.78
+0.03 +0.02%
Volume: 1.03M
Feb. 22, 2017 10:23a
loading...
/quotes/zigman/417006/composite
US : U.S.: NYSE Arca
$ 17.04
+0.01 +0.06%
Volume: 753,807
Feb. 22, 2017 10:23a
loading...
/quotes/zigman/70614826/composite
US : U.S.: NYSE Arca
$ 24.29
-0.33 -1.34%
Volume: 7.82M
Feb. 22, 2017 10:23a
loading...
/quotes/zigman/70614838/composite
US : U.S.: NYSE Arca
$ 40.55
-0.24 -0.59%
Volume: 1.36M
Feb. 22, 2017 10:23a
loading...
/quotes/zigman/59392505/composite
US : U.S.: NYSE Arca
$ 11.48
-0.49 -4.07%
Volume: 8.92M
Feb. 22, 2017 10:23a
loading...
/quotes/zigman/76435055/composite
US : U.S.: NYSE Arca
$ 28.23
+1.11 +4.10%
Volume: 1.75M
Feb. 22, 2017 10:23a
loading...
/quotes/zigman/68270/composite
US : U.S.: Nasdaq
$ 136.50
-0.20 -0.15%
Volume: 3.64M
Feb. 22, 2017 10:45a
P/E Ratio
16.34
Dividend Yield
1.67%
Market Cap
$717.20 billion
Rev. per Employee
$1.87M
loading...
/quotes/zigman/220026/composite
US : U.S.: NYSE
$ 174.97
-0.59 -0.34%
Volume: 496,604
Feb. 22, 2017 10:23a
P/E Ratio
22.88
Dividend Yield
3.25%
Market Cap
$107.53 billion
Rev. per Employee
$628,379
loading...
/quotes/zigman/65717763/composite
US : U.S.: Nasdaq
$ 212.32
-0.43 -0.20%
Volume: 310,713
Feb. 22, 2017 10:23a
P/E Ratio
N/A
Dividend Yield
1.93%
Market Cap
$84.88 billion
Rev. per Employee
$843,312
loading...
/quotes/zigman/230066/composite
US : U.S.: NYSE
$ 180.64
+0.38 +0.21%
Volume: 528,159
Feb. 22, 2017 10:23a
P/E Ratio
14.56
Dividend Yield
3.10%
Market Cap
$171.40 billion
Rev. per Employee
$211,562
loading...
/quotes/zigman/302497/composite
US : U.S.: NYSE
$ 184.74
+1.37 +0.75%
Volume: 332,086
Feb. 22, 2017 10:23a
P/E Ratio
22.58
Dividend Yield
2.55%
Market Cap
$109.33 billion
Rev. per Employee
$328,758
loading...
/quotes/zigman/235840/composite
US : U.S.: NYSE
$ 57.84
+0.48 +0.84%
Volume: 1.53M
Feb. 22, 2017 10:23a
P/E Ratio
25.37
Dividend Yield
1.25%
Market Cap
$94.89 billion
Rev. per Employee
$473,395
loading...
/quotes/zigman/80597/composite
US : U.S.: Nasdaq
$ 110.58
-0.35 -0.32%
Volume: 3.64M
Feb. 22, 2017 10:23a
P/E Ratio
43.53
Dividend Yield
0.50%
Market Cap
$59.87 billion
Rev. per Employee
$748,889
loading...
/quotes/zigman/88601/composite
US : U.S.: Nasdaq
$ 94.95
-1.02 -1.06%
Volume: 328,311
Feb. 22, 2017 10:23a
P/E Ratio
39.95
Dividend Yield
2.10%
Market Cap
$9.76 billion
Rev. per Employee
$214,726
loading...
/quotes/zigman/22227/composite
US : U.S.: NYSE Arca
$ 58.89
-0.18 -0.30%
Volume: 121,460
Feb. 22, 2017 10:23a
loading...
/quotes/zigman/536019/composite
US : U.S.: NYSE
$ 34.84
+0.07 +0.20%
Volume: 1,200
Feb. 22, 2017 10:07a
P/E Ratio
N/A
Dividend Yield
0.79%
Market Cap
$242.97 million
Rev. per Employee
N/A
loading...

This Story has 0 Comments
Be the first to comment
More News In
Investing

Story Conversation

Commenting FAQs »
Link to MarketWatch's Slice.