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The Weekly Track who-is-first

- The Weekly Track – Who is First? by Bob Savage
http://track.com/articles/the-weekly-track-who-is-first/

As the world starts a new chapter with the 45th US President, focus shifts from globalization to economic nationalism. The comparison of the week was between the Chinese President Xi speech at Davos on global trade vs. Trump’s inaugural address on economic nationalism. This will be the role-reversal that matters to allies and enemies of the US in the years ahead. The expectations are that nations that have energy, water, crop lands and sufficient populations to work may benefit as they won’t need to lean on trade to fix their geographic limitations. We no longer believe in the wealth of nations but in something else. This puts Brazil, Canada, India, Australia and the United States into a new league for stability while energy rich or population rich nations like Saudi Arabia and Pakistan may have less joy in capital flows. Europe, Japan and China maybe the least happy position in a new Trump world where globalization and trade matter less than bilateralism and self-i
nterest. The debate is whether we have seen the peak in global trade in this decade.

In the week ahead focus will be on where the first acts of Trump set the agenda for the rest of the 100-days. The momentum and success he has in enacting change will be scrutinized by the markets more than any US jobs report every has been. There are plenty of concerns abroad as well – with the Chilean pay deal for copper miners at Escondida; with Turkey and its central bank as it deals with political pressure from Erdogan and the TRY down 7% on the year so far. The UK focus on Brexit also continues with the Supreme Court ruling on Article 50 due Tuesday. The key point about next week is that we are stuck in consolidation of the post November 8th trends for higher equities and a stronger USD until we know more about “hard” Brexit and Trump trade policies. The path forward about whom is first may be constrained by whom is last. The race to the bottom in FX maybe still underway as we have seen from last weeks ECB and BOC meetings and the reactions of the EUR and CAD
. The ability to grow in a world bent on economic self-interests and less international cooperation maybe on the margin about FX more than rates or taxes. If oil set the pace for value in FX over the last 40 years, perhaps water will be replacing it in the next 40 – and for that we may see a shift in how the world grows and trades. The value of water research from Unesco might be better reading than the OPEC monthly.