Gridlock Can Be Good

We here at Minter Markets in Oslo were fortunate to have Steen Jakobsen, the CIO of Saxo Bank, present his views for our clients in Helsinki and Oslo last week. I have known Steen for many years and although I don’t always agree with his views, I always respect them and I am always challenged to look at the markets in a different light when we discuss markets. 

Some of the things we agree on:

  1. Political gridlock can be market positive.  The house will probably block more tax cuts, which would have made the deficits increase even more and pushed the Fed to be more aggressive in its rate hikes to combat higher inflation.
  2. We agree largely on our view of President Trump, and also agree that his presidency has/will bring more Americans than ever into the political discussion.  Women, minorities and millennials will become a bigger voice in the years to come.
  3. China will take the lead on stimulating the global economy in the months to come and will be a positive for Emerging Markets, especially in the Asia region.
  4. Fed Chairman Powell is doing a good job and is implementing the mandate in the correct manner.  A refreshing change from the last three Fed governors.
  5. We are both negative to the GBP. Positive to the USD into the year end.  We think AUD and NZD are interesting on the back of China pumping up their economy.

Some of the things we are not in agreement on:

  1. Steen is looking for December to be the last of the Fed rate hikes for this cycle.  I am looking for the Fed to hike twice more in 2019.
  2. I am looking for Brent Crude oil to trade in a $70 to $80 range into Q2 2019, Steen looks for the price of oil to trade lower
  3. Steen is looking for the USD to trade lower after the new year, I think it will stay firm as long as the Fed is hiking.

We have been positive to the gold market, but waiting for a break of the resistance level at 1238 before adding to our position.  We were taken out of our long position at our entry point and will watch developments going forward.

With the strong USD, gold is testing the lower end of the trading range, with support between $1180 and $1200.

USD Index broken to new highs, helped by the uncertainty around Brexit, Italy and the interest rate differentials between the U.S. and the other major currencies.

A ways to go in terms of voter participation, but at least headed in the right direction!

A slide from presentation by Mehlman Castagnetti at Rosen & Thomas

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TickerDate OpenedEntry PriceStopTarget PriceCurrent Price
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Then 12.50

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