Thesis for inflation: Trump. All of the major initiatives suggest higher prices. Lower corporate and personal taxes, reforming the affordable care act, anti-globalization incentives and spending on defense. Clearly, he has demonstrated that he is willing to follow through on things over the first month and he has a Republican House and Senate to enable it. A secondary case for inflation would be simply looking historical charts of the US Dollar vs. the Euro and Canadian Dollar.
Thesis for a correction: Everyone knows that stocks are over inflated but no one knows if it actually matters (as discussed in many other posts). Arguments against a correction for me are all different versions of a flight to assets in a world of low interest rates, the general idea being that there's no where else to go and this will not change any time soon. Having said this, I still worry about that bubble bursting in the medium term because of relatively new factors at play including rising interest rates, Trump, Brexit and the possibility of Frexit with Le Pen.
Medium term strategy: 50% into EWC (iShares Canada ETF) and 50% in GLD (SPDR Gold ETF)
General thesis: The Canadian market is mostly an extension of the US market with a couple of mitigating factors such as currency differences and the importance of certain market segments like oil and gas. Getting into EWC seems like a good way to mirror the US market and to play USD vs. CAD at the same time. Gold would be the market counterbalance with the general idea being that as stocks go down gold prices go up (this may be the critical flaw in this thought process) while also hedging inflation. In summary, both would support a falling dollar and would be slightly weighted to rising stocks.
Questions: - Do you share the concern around Trump driven inflation 1 month in? - Do you think that inflation will outpace the effect of rising interest rates? - Does anyone have other ideas for achieving the desired outcome a different way?
Disclaimers: - I am new to this subreddit and am striving to be interesting/useful! - I don't care about politics, just the consequences of them ;)
Submitted February 19, 2017 at 11:43AM by WeAreTheBorg2 http://ift.tt/2kN3yUy
