With the summer heat here and the beach calling, it’s a good time to look at what’s hot with traders, investors and savers. Two things — politics and cryptocurrencies — seem to be in the thoughts of many people I’ve talked to recently. And interestingly, the two are often related.
Domestically, the Obamacare-repeal debate has long been dominating the political discourse. But after many starts and stops, we seem to have finally hit a wall after Republican senators failed repeal the Affordable Care Act (Obamacare), much less craft a new and workable solution.
This will have a growing negative impact on the U.S. economy, as health exchanges could continue to fail with no new system to replace them. The bigger political picture also seems to have darkened considerably, with serious reform becoming less and less likely just as important items like the U.S. debt ceiling and tax reform come due for debate after lawmakers’ August recess.
More political failures for President Trump could seriously hurt stock and bond markets that are priced for perfection. After all, expectations for positive political outcomes have been part of the “Trump Bump.”
International politics have also gotten quite hot recently. From North Korea to Russia, the administration must deal with a waterfall of cascading events. These events might do little individually to influence markets, but their cumulative effect could lead to serious market disruptions.
Although Washington’s latest sanctions against Russia (and Moscow’s response of kicking out U.S. diplomats) might seem trivial, they’re more evidence of strained U.S.-Russian relations. Europe and China also represent large risks for the U.S. market, as their economies struggle with oversized debt loads and internal political strains.
Europe is dealing with immigration problems as Germans go to the polls in the fall. And the Chinese are looking to their upcoming 19th National Congress with an eye toward restructuring the country’s leadership.
Of course, North Korea is the hottest topic of them all, as Pyongyang claims it can now launch intercontinental ballistic missiles capable of reaching the U.S. mainland. Bellicose talk has been the order of the day from the Trump administration. This appears likely to continue, so the risk of market disruptions keeps growing.
Cryptocurrencies like Bitcoin also are a hot topic, with U.S. Securities and Exchange Commission recently issuing an ambiguous ruling on them. It appears that the SEC might consider cryptocurrency coin sales as security offerings in some instances, but not in others.
But the real message seems to be that after a year of unprecedented growth for Bitcoin and the like, governments want to get a grip on a market that transcends national borders. Cryptocurrencies represent a tiny but growing piece of business transactions as people start to realize they can buy, sell and trade freely, without any government intervention. Civil asset forfeiture and bank bail-ins could become moot points for cryptocurrency users.
One final thing that looks to heat up very soon is my favorite subject, precious metals. With all of the uncertainty surrounding both politics and markets, this autumn is shaping up to be an explosive one for gold and silver. After a good first half (gold gained more than 9% and silver 3%), I believe the trend remains positive.
I expect to see more gains for precious metals in the second half. After all, the need for safe-haven protection is only growing — and precious metals are the “gold standard” for that.