What is the future of NAFTA and could there be flying cars in our future? The Trump administration has brought about many changes, one of the most recent the renegotiation of NAFTA. But, what does it mean for the market? Get all the details in this edition of Steady Investor’s Week…
The Future of NAFTA – it could be only a matter of days now before the White House gives Congress the obligatory 90-day notice that it will begin negotiations on NAFTA. What the Trump Administration has insisted is a bad trade deal, whether on the most favorable terms or not, created millions of new jobs and created supply chains that provide low cost goods to consumers throughout North America. Dismantling or renegotiating trade deals is a very difficult and often time-consuming, arduous process. So it’s not likely we see any material change to the flow of goods over the next year. It will be telling to see how far the pendulum swings away from free trade and what the potential reaction could be when it comes to new tariffs. The net effect of protectionism, over time, is negative to economic growth and inflation. If the White House gives Congress notice within the next week or so, it means NAFTA talks could start in May. Mark your calendars.
The Powerful Economy Down Under – Did you know? Australia’s economy has not had a recession on well over 20 years! Its economy is more diverse than just mining and resources, as it has expanded successfully into services and consumption. This week, the Reserve Bank of Australia kept interest rates steady at record low 1.5% today, signaling that they would keep rates steady for the next few meetings at least. They appear to be in sync with the Federal Reserve of the United States, and their central bankers indicated that they think we are nearing the end of the monetary easing cycle. The expectation is that the Australian economy will grow around 3% annually for the next year or two, with inflation at or above its 2% target. Read: Australia’s economy is healthy.
China’s Foreign Exchange Reserves – lots of headlines have been focused on China’s precipitously falling foreign exchange reserves, but what is often left out is how they are coming down off record highs and that China still has $3 trillion stashed. Capital has been flowing out of China for years now even as the government has increased efforts to tighten capital movement controls and stabilize the yuan. Most likely what we’re seeing, however, is immense foreign investment from China as they posture to increase their global footprint as the U.S. seemingly aims to focus on more domestic issues, retreating from its role as global policeman and economic leader.
Flying Cars? Really?? – Really. The ride-sharing behemoth Uber, Inc. has hired leading NASA engineer Mark Moore to spearhead research into airborne vehicles. Judging from Uber’s massive pocketbook and multi-billion dollar valuation, investors should not view this as just another gimmick, or as a Jetsons cartoon fantasy. The engineer, Moore, has spent the last 30-years at NASA, highly qualifying him for his new role as director of engineering at Uber Elevate.
Greece, Here We Go Again – Greece’s sovereign debt issues are re-emerging from the dead, again. Bond yields in Greece rose fairly sharply this week as the IMF suggested that another wave of massive debt default appears to be on the horizon. Greece has struggled to spur growth and take steps toward fiscal austerity at the same time, as its citizens have grown accustomed to a certain way of life characterized by high paying government jobs and entitlements. Greece may be forced to leave the eurozone in order to avoid a massive debt haircut, as it has been unable to gain competitiveness with a currency (the euro) that is much stronger than its economy.
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