Upcoming Week of Jan 20

My apologies for this first section; it is long but probably necessary this week.

When I look at the upcoming week, the first thing that comes to mind is that we need to talk about Mr. Trump. After all, he’s a bit of an enigma for quite a few people, but this is especially true for foreigners. Quite frankly, most foreigners are not used to this type of brash behavior that he often shows. However, it’s not really that difficult, nor is it something that needs to be overthought. As an American, perhaps I might have a little bit more clarity when thinking about what the President will be doing. 

To begin with, he probably will implement some tariffs. I would anticipate that both Canada and Mexico can expect some type of tariff being levied, and quite frankly, at this point in time, I think Canada is actually more vulnerable than Mexico. This is mainly due to the fact that the Canadians have decided to essentially suspend parliament, and therefore Trump will be negotiating with himself. One of the biggest weapons that the Canadians claim to have is the ability to shut off energy heading south of the border. However, this is complete nonsense considering that the Canadians cannot even refine their own petroleum on the whole. 

The solution in Canada might be to export crude oil to Asia or other places, but the reality is that almost 80% of everything that leaves Canada ends up in the United States. Furthermore, most of the energy in Canada is found in Alberta and Saskatchewan and shipped east. A little-known fact is that a portion of the pipeline connecting that region of Canada to Ontario and Québec passes through the United States. There is little chance that Trump will allow the Canadians to cut off energy and that energy to flow through the United States without shutting that pipeline down. The question at this point will be whether or not Trump feels like nailing the Canadians to the wall or if he will show some mercy. I suspect that although he will be tough, he won’t do anything to throw Canada into the next Great Depression. In short, I think Canada has a lot of issues right now, and Trump is probably waiting to see whether or not the conservatives take over. There is a compelling argument to support this, leading me to believe that Trump may impose some tariffs, but he will ultimately pursue a strategic approach to achieve some form of economic union with Canada. This is a very real possibility that most people are sleeping on. 

Mexico will fold like a cheap suit. Quite frankly, there is a lot of talk from Mexican officials, especially President Claudia Sheinbaum, but most of this will be filed under the name of “cheap theatrics,” as obviously she will not want the locals in Mexico to perceive her as being weak. Furthermore, any time you talk about Mexican politics, you really are starting to talk about the cartels. I think Mexico might be an interesting place to watch because Trump is already suggested that drone strikes could be coming for the cartels. Furthermore, unless the border is closed, he seems hell-bent on Mexico paying for it economically. The Mexicans know this and will back down before it gets out of hand. 

Trump is a bit of an enigma for foreigners, mainly because he is “America first,” something that no president has been for roughly the last 60 years, with the exception of Ronald Reagan. Quite frankly, the United States can no longer afford to carry the bill for half of the world. It’s not only a financial issue, but the populace is also extraordinarily angry about the nonstop bailouts for places like NATO and Ukraine, as well as untold millions going to various African countries that don’t even make the news. While most Americans are very charitable, and in fact the United States gives more to charity than I believe any other country in the world the last time I looked, the reality is that the graft has to stop. It is because of this that you can fully anticipate that the United States is going to be doing business with its own interests in mind going forward. The main shift here will be that the interests will be economic and not necessarily the so-called “deep state” lining their own pockets. 

While much of the world fears what the Americans might do next, as they think the US is going to be like a bull in a China shop, what they don’t understand is that most Americans no longer look at their role as to babysit the rest of the world. For example, there are signs of absolute exacerbation from the voting public as Biden sends another $5 billion to Ukraine in the last moments of his administration. Speaking of Ukraine, that war is about to end. Germany is cutting off funds, and the United States almost certainly will be. 

At the end of the day, President Trump is a businessman, and he will do what he can to increase economic strength in the United States while recognizing that the rest of the world certainly can benefit at the same time. Just because the man is going to be making deals in favor of the Americans does not necessarily mean that people won’t benefit in other places. In fact, he has a long history of being fairly generous, despite what you may read in the news, and therefore, as long as it doesn’t hurt America, he really doesn’t care what goes on with other economies. In short, he will leave those who have no malicious intent toward the United States alone. 

Something that I get a lot of questions about is Greenland. This whole Greenland thing isn’t as insane as it sounds, and in fact, in 1946, President Eisenhower tried to buy it. There have been a couple of other overtures to the Danish to buy Greenland since then, so this is nothing. This is how I see this whole thing playing out: Greenland will claim independence. Trump will make some type of overture to buy the country and absorb it into the United States. At the end of the day, all parties will agree that Greenland will be defended by the United States, which makes sense considering we already have a major Air Force base there and will enter an economic partnership as an independent country with America, bringing prosperity to Greenland via the mineral sector. As crazy as this sounds, and in the next few years, I suspect there will be a lot of money to be made via the equity market via companies with exposure to the Greenlandic natural resources.

MLK Day

Let’s not forget that Monday is Martin Luther King Jr. Day in the US, so the markets will be closed on Wall Street. Liquidity in other markets is likely to be effected in North American trading.

Crypto

If you wanted any hint as to where crypto is going, all you have to do is look at the fact that “Trump coin” was released on Friday and by Saturday evening had already outperformed what the S&P 500 did over the last 60 years. While this nonsense in itself is not important, what this does tell me is that crypto is about to explode to the upside. 

The new Trump administration is very pro-crypto, and while that is a lot different than passing laws, it at least means that certain assets will suddenly come into the limelight. In fact, Ripple has been exploding to the upside now that the SEC is likely to finally let it be. It’s been one lawsuit after another, and the new head of the SEC is very pro-crypto, so Ripple may very well be one of the best performing crypto currencies this year, especially if US banks start to adopt using it for cross-border payments. 

That being said, crypto is always very volatile and very dangerous. It is because of this that I never use leverage. However, buying on the dip and “dollar cost averaging” might be the way to go this year, because I anticipate that by the end of 2025, pretty much anything crypto-related in the top 10 or 15 coins will have a good year. Obviously, there are some other ridiculous ones out there, but those are always a gamble.

US Dollar Still Reigns

I believe that the US dollar will still be strong, and I think that this week might start out with a little bit of a pullback in the US dollar, but any weakness that you see in the greenback should be thought of as a potential buying opportunity. Quite frankly, some currencies, such as the Australian dollar, euro, and British pound, are just oversold. That oversold bounce should give you an opportunity to start shorting these pairs again if we can get a couple of days’ worth of strength. 

I believe the same thing applies to the USD/JPY pair, but we do have the Bank of Japan coming on Friday, so therefore I will probably be a little more sanguine about that currency pair of the next couple of days. I still believe in the upside, but I also recognize that the Japanese like to play a lot of theatrical games with their press conferences, and the fact that the Japanese don’t even have an actual time that they release scheduled and that they just jump out on the newswires with it, means that this pair will be very difficult to trade in the back half of the week.

Trump Rally

There has been a significant “Trump rally” on Wall Street for a couple of months, and I believe at this point in time there is a very high likelihood that there will be another one coming in the very short term. In fact, I would fully anticipate that once he starts firing off executive orders, Wall Street will find something to get excited about. There are very few things that Donald Trump quotes more than the Dow Jones Industrial Average or the S&P 500, so be aware of the fact that he is going to do everything he can to pump American equities. 

As long as the bond market doesn’t completely implode, I think you have a situation where the stock market is prime to go higher, especially now that “President Pump” is back in the Oval Office. Some of you may not remember this, but he would literally tweak things just to make the stock market go higher. Things are going to be extraordinarily fun over the next 4 years. For what it is worth, the United States is seeing both inflation and economic growth accelerate, which is generally a good thing for equity markets. If you do not have exposure to the US stock market, it’s not too late, but this is something that you won’t want to miss out on. 

Over the years as a technical analyst, I have been asked questions about charts and patterns, and while I still use that to a point, the reality is that there has to be a reason for movement on the chart. Quite frankly, at this point I think we are going to see the stock market get even more aggressive to the upside given enough time, despite the fact that a lot of people would look at the chart and say that we have gotten “too expensive” at these levels. I’ve been hearing that for a few years now, and now we have somebody in the Oval Office who actually worries about whether or not the chart is going from the lower left to the upper right. Hang on, hold tight, and profit from what you are about to see.