Last week and Monday saw investors begin to exit the Trump Trade seriously in the face of political reality. President Donald Trump will not necessarily be able to push through all of his business-friendly agendas without the same difficulties other past American leaders have faced. This became clear in the wake of the Republican withdrawal of the Obamacare repeal and replace bill.
Across the pond in the United Kingdom, Prime Minister Theresa May cleared the final hurdles in time to announce her intention to invoke Article 50 of the Lisbon Treaty on Wednesday, March 29. She begins a busy Brexit calendar of up to two years of regulation rollbacks and negotiations for free trade with the EU against the backdrop of a severe lack of diplomatic, trade negotiating, and general civil service staff.
Meanwhile, as the European Union prepared to celebrate its 60 year anniversary of the Treaty of Rome, yet another crack in the EU armor appeared. Greece was once again on the verge of financial collapse just in time for the major anniversary celebration which also occurs exactly the same week as Britain declares its intentions officially to leave behind the single market and trading superstate block forever.
In France, the traditional parties suffered another week of humiliating setbacks as both front runner Marine Le Pen and independent challenger candidate Emmanuel Macron surged ahead in the latest French presidential tracking polls. Everywhere you turn, you see reasons to remember that gold really offers insurance and protection during market turbulence.
“Trump Trade” Finally Cracks
Since the results of the U.S. Presidential election became clear back in early November, the American stock markets have been on a rampage higher which has become known as “The Trump Trade.” This seemingly unstoppable roar up even set a new record of over 100 trading days without a minor one percent down trading day. This artificial stock market bubble trade finally began to show signs of cracks and exhaustion as U.S. and world markets pulled back significantly.
Monday saw investors unwind their November bullish bets on the markets as they witnessed the late Friday news that the Republican Congress and President Trump were unable to proceed with the Friday scheduled health care reform agenda. Investors suddenly realized that they could no longer take for granted the idea of an effortless passage of Trump’s business-friendly tax cutting and deregulating agenda. Citigroup warned about this with:
“Although tax reform appears to have broader support and may be easier to pass, the AHCA [Affordable Health Care Act] experience sends investors a cautionary message about opposing factions within the GOP caucus.”
The resulting alarm bells throughout the global and U.S. markets were not merely limited to stock market declines. Look at this chart showing the drop in the U.S. dollar, which has just broken through its 200-day daily moving average:
It is the sometimes-bellwether for American economic confidence the dollar which has dropped nearly two percent during March. This brings it to near the point where it was in November when President Trump became elected, before it had rallied over six percent on the election results and prospects.
The VIX Volatility Index, affectionately referred to as the “fear gauge,” has also made a striking comeback. This CBOE Volatility Index roared 15 percent higher last week, marking the largest gains for the year so far, as news reached the markets that the new health care bill would not overcome opposition in the House of Representatives. Even in Europe, their VStoxx Index charged 11 percent higher Monday to reach its greatest level for the month.
This development bears watching, as analysts have long commented that the markets are way overdue for a major correction of 10-20 plus percent. It is another reason why you need gold to help protect your retirement assets.
Theresa May Powers Ahead with “Unstoppable” Brexit
British Prime Minister Theresa May cleared her remaining hurdles last week to give notification to the European Union that it will finally pull the trigger on the Brexit this week on Wednesday, March 29th. There are many concerns in the United Kingdom regarding how she will be able to square off with the EU having less than 400,000 civil servants on government payrolls. This represents the lowest number of such government employees since the 1940s.
On the to-do list of the United Kingdom government is the herculean task of withdrawing fully from the EU treaties and regulations which have been a part of Great Britain for over 40 years. On top of this, May must establish a new trading partnership with the country’s largest trading market while negotiating down the “bill” the EU wants Britain to pay upon final exit.
All the while, Britain must arrange commercial deals with other countries throughout the world, such as the United States, India, and China; convert European laws into British ones; and establishing new systems and regulatory groups for handling customs and immigration.
This is of course in addition to the normal, everyday mandates of protecting the U.K., delivering healthcare, and effectively collecting taxes. It is such a monumental undertaking that the country’s highest civil servant Jeremy Heywood recently admitted “the challenge of Brexit has few, if any, parallels in its complexity.” Here is a list of the imminent Brexit related events on the calendar just for starters:
Concern is mounting that what EU Law Professor Catherine Barnard of Cambridge University stated may be true:
“The reality is that this can’t possibly be done in two years because it’s such a vast undertaking. As the government turns over each individual stone, they realize that there are quite a lot of stones underneath and none of them can be dealt with very easily.”
The fact that the National Audit Office admitted 26 percent fewer civil servants now work for the British government than did only one decade ago highlights the risks and dangers of failure in delivering May’s much-touted “successful Brexit.” Deloitte LLP consulted with the government last year and determined that the U.K. government apparatus requires another 30,000 additional civil servants to keep up with the increasing burden of work.
As EU Celebrates 60 Years, Greece Nears Another Financial Crisis
Even while the EU was busy celebrating its accomplishments and trying to overlook its gross failures at the weekend-long 60 year celebration of the Treaty of Rome that set the European Union into motion, Greece walked away from in-person negotiations with its various creditors on their latest bailout installment. The economically traumatized nation is nearing a seemingly inevitable reprise of the 2015 era chaos that nearly catapulted the most heavily indebted nation of the European Union into full-blown economic collapse.
It comes amidst ongoing disagreements between the Greek government and the various parties of the European Union, European Central Bank, and International Monetary Fund. The two sides seemingly can not reach agreement on the financial reforms the creditors say must happen within the Greek pension system and the energy and labor markets. If Greece is unable to successfully pass its latest review, then it will not be able to access the next critical installment of its financial aid money before the coming hefty round of 7 billion euros (or $7.6 billion) in government bonds become payable in July.
The problems began to get more serious when the Greek Finance Minister Euclid Tsakalotos announced he was returning back to Athens no later than this past Saturday. This occurred despite the fact that the opposing two sides still had significant problems and differences to work through.
The Germans refused to back down on the Greek demands, as usual. On Friday, Germany’s Finance Minister Wolfgang Schaeuble ratcheted up the rhetoric and pressure on Greek Prime Minister Alexis Tsipras with:
“Greece has said it wants to stay in the euro. Greece can only do that if Greece has a competitive economy. To that end, it needs to carry out reforms, and we’re giving Greece time to do that.”
Despite the frustration and fury on the Greek side, the country stood with its 26 other EU nations in Rome to help stage a unified-looking front for the Saturday summit. Prime Minister Tsipras went so far as to agree to sign the gathering’s Rome declaration, which turned out to be watered-down on what the EU officials had hoped for originally.
These are all good and continuing motivations for you to seriously consider why you should own gold in times of financial crisis. Gold is the rock that will ensure your retirement accounts weather the storm of the geopolitical chaos which continues to unfold around the world.