Financial Market Outlook: February

Financial Market Outlook: February


A rather hilarious combination of simultaneous Trump-intended fiscal stimulating and FED-anticipated rapid rates rises is cooling of the economy, could result in a debt increase, export/GDP decrease and a further demotivation of zombie companies to renovate or to free space for new potentially more successful companies, while there is still time before a total crush may occur.

Knocked down free trade agreements and a tax on imports could impact both parties equally negatively and even worse, the US could be gradually cut off from international trade if the above mentioned takes place.

It is rather unlikely president Trump will change his stance, therefore the US economy is at substantial risk at the moment. The next question is how long Donald Trump will remain in power.

Trump’s enterprise doesn’t seem to be creating any positive result overall, as it has around a 1 billion dollar debt attached, as newly found. This impacts his companies valuation (the calculation is based on future profits forecast), which makes the hypothetical settling of his debts much more difficult. It could create an opportunity for some foreign governments, which could possibly decide to generate rescue revenues for Trump’s businesses in order to secure his favor, which may not benefit both countries equally.

Nevertheless the US economy still seems to be performing quite well at the moment, although we believe it has achieved its peak and it is slowly heading down now as part of its natural cycle. We perceive Fed policy (interest rates increase) as perfectly appropriate and beneficial for US economy. We expect the rates to be increased only once this year and in this economic cycle to the level of 1%. We neither expect three rises nor a final level of 2%.

Trump policies could possibly accelerate the slowing down not only of US, but also world economy, although a sudden crash is very unlikely.


Brexit will also impact the EU. Trump policies may not benefit the EU either.

Nevertheless the EU has sustainable economy with higher export than import, currently improving inflation and continuously decreasing unemployment. Although the level is still not satisfactory, the trade balance is continuously, though slowly, improving down to the increase in export rather than decrease in import, which is very positive.

Both business and consumer confidence are on the rise, though still far from perfect levels. The GDP may not be mind blowing, nevertheless it is supposed to improve. The fact that debt to GDP is decreasing in the EU should not be overlooked. Despite of the criticism we believe the EU economy is being managed well, when all circumstances are taken into account. Yes it is challenge.


Trump policies are risky for Japan (especially for Japanese car factories in Mexico). Nevertheless the Japanese economy is picking up. Likewise in Europe the trade balance is improving and this is also down to the increase in export, rather than the decrease in import.

Japan has finally started creating trade surplus, although the level is mild and the improvements have taken place relatively recently, therefore the long term consistency has not been confirmed yet and we need to wait to see whether these improvements will last. Although Japan has impressively lowered unemployment levels the household spending remains rather subdued.

We are rather optimistic with regards to Japan in the foreseeable future.


Although the British parliament needs to approve Brexit, which is creating some hope and optimism among investors, the UK departure from the EU seems to be inevitable and it can send the UK into economic recession. Neither conservative nor laborer MP’s are willing to go against the will of the nation expressed in the referendum.

The possible trade deal with US may create another bubble of optimism among investors however to create, implement and fully benefit from such a deal will take time and the impact could be limited.

The UK was suggested to look at Switzerland, which indicates the constructive initiative of the EU to resolve the Brexit issue.

The UK economy is performing well at the moment and would be expected to carry on with its good performance in the foreseeable future, nevertheless the Brexit may change everything and dramatically.

Brexit is bad news for trade and the country may fell apart after all, as Scotland is supposed to fight for independence in order to remain in the EU. Northern Ireland may do the same. This could cause a massive and long lasting economic crisis in Britain.


Although the last quarterly GDP trickled down in to negative territory, we have reason to believe it was just one-off and the economy will remain on track.

The Australian economy is in reasonable condition and will further benefit from a supposed increase in gold prices (the gold price is supposed to increase as a reaction to the uncertainties the world is currently facing).

New Zealand

We do not worry too much about New Zealand. The economy continues to perform very well. Nevertheless this could result in too strong a currency, which may negatively impact exports. New Zealand is one of the two countries (alongside the EU) mentioned in this report with a decreasing debt to GDP ratio. New Zealand’s debt is impressively low.


Canada may be impacted by Trump’s policies if implemented, which is not the best news, although Trump doesn’t seem to hold too many grudges towards Canada. On the other hand, Canada is supposed to benefit from an increase in oil prices.

We perceive Canadian economy as being in fair condition, which is where it should remain for the foreseeable future.


GDP growth in China remains miraculous, although the debt to GDP has been increasing rather fast. Nevertheless the current debt level of China is still acceptable.

China may agree on free trade agreements with other countries, as a reaction of the world to Trump’s intended policies, which would be very positive for the country.

We are bullish on gold, silver, the and dollars.

We are slightly bullish on oil, the and the .

We are neutral on the , and .

We are slightly bearish on the , and cooper.

We are bearish on the and .

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