...a Trump victory will be a hit on China's economy which would...

...a Trump victory will be a hit on China's economy which would reverberate across into our resource sector.

...Trump's tariff and mercantilism policies would also restrict international trade - he will try to 'save America' at the expense of all others - a great America with all others including allies losing (win-lose) does not help in an interconnected world economy.

...Will the US dollar grow stronger and US rates stay higher for longer as Trump inflates? Not a tailwind for Gold unless his administration (provided he wins of course, I won't be too presumptive) causes turbulence.  

...Be Careful What You Wish For.
Why this strategist thinks the ASX at 8000 is a warning sign

Barrenjoey’s chief macro strategist won’t spend much time celebrating the latest milestone. He says the index’s fair value is about 7300.
Jul 15, 2024 – 5.59pm


Damien Boey, the chief macro strategist at Barrenjoey, won’t spend much time celebrating the ASX 200’s long march to 8000 points.

He reckons there’s an awful lot of good news priced into Australian stocks, and his models suggest the fair value for the index is about 7300, or 9 per cent lower than Monday’s historic close of 8017.6 points.

How we hit this milestone explains why Boey is worried that a reversal is on the cards.

While it’s taken the index more than four years to go from 7000 points to 8000 points, the 18.2 per cent rise since the start of November has been more impressive.
Boey says this is the first key ingredient to the march to 8000 – falling bond yields and the prospect of lower rates pushed equities higher in the United States, lifting the local bourse along the way.

Australian healthcare stocks, which are dominated by CSL and Cochlear, and are arguably the closest thing we’ve got to America’s big tech sector, have been an impressive winner during the period.

The second key ingredient has been weakness in China, which has forced investors to scan Asia for safe places to park their money in the region, and led them to push Australian bank stocks to record levels. According to Bank of America data, Australia’s major banks are among the 20 biggest contributors to Asia-Pacific equity returns in the past 20 years, with Commonwealth Bank the fourth-biggest (behind BHP).

On Monday, these two key factors were compounded by growing certainty that Donald Trump would win November’s presidential election. “We are pricing in pretty much all the good news from a Trump and Republican sweep right now,” Boey says.
But those tailwinds are not without risk.

Boey says the belief in the banks is understandable; the huge amount of equity Australians have in their mortgages limits the potential for bad loans. But the banks will find it hard to increase this because the economy is slowing, households are eating into their savings buffers, and house prices are coming under pressure. And bank stocks look expensive compared with their global peers, with CBA shares particularly stretched.

A Trump victory could mean pain for China that eventually flows through to Australia. Boey says the huge US tariffs on China would devalue the yuan, lead to capital flight and liquidity issues, and limit the Chinese government’s ability to stimulate its economy, hitting demand for Australian resources.

That would hit mining sector earnings and national income at a time when Boey says the Australian economy is already struggling to expand in line with population growth.

Domestically focused ASX companies might well find that stalling demand erodes their pricing power. Although the stage three tax cuts will provide a temporary boost, Boey says sticky inflation will limit the Reserve Bank’s ability to support the economy through rate cuts. “I look at the market at 8000-plus and actually think it’s quite rich,” he says.

So if the barbells of the Australian market – banks and miners – carry risks, where do investors head next? Boey is sceptical about the small caps, given valuations remain relatively robust, and he worries that a skew to ASX value stocks will lead investors back to banks and resources.

His suggestion is what he calls defensive growth stocks: utilities, telcos, healthcare, staples, industrials and some insurers, including Medibank and Steadfast.

But investors need to tread carefully. The big question across every sector, Boey says, is which companies will find their pricing power holding up as economies slow.

“We are going to question everything to get satisfaction about the non-cyclicality of earnings,” he warns.