Trump Backs Off Trade Policies: Bullish

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Includes: CRF, DDM, DIA, DOG, DXD, EEH, EPS, EQL, FEX, FWDD, HUSV, IVV, IWL, IWM, JHML, JKD, LLSC, LLSP, OTPIX, PSQ, QID, QLD, QQEW, QQQ, QQQE, QQXT, RSP, RWL, RWM, RYARX, RYRSX, SBUS, SCAP, SCHX, SDOW, SDS, SFLA, SH, SMLL, SPDN, SPLX, SPUU, SPXE, SPXL, SPXN, SPXS, SPXT, SPXU, SPXV, SPY, SQQQ, SRTY, SSO, SYE, TALL, TNA, TQQQ, TWM, TWOK, TZA, UDOW, UDPIX, UPRO, URTY, USA, USSD, USWD, UWM, VFINX, VOO, VTWO, VV, ZLRG
by: Elazar Advisors, LLC

Summary

President Trump's latest exchanges with Japan and China were much more bullish than his previous threats.

A trade war was his presidency's biggest market risk.

After this week's events that risk appears to have dissipated.

President Donald Trump has two main categories of policies in the eyes of market participants. There are policies like bank deregulation which are bullish for growth. On the other side are risk policies like inciting a trade war. It appears President Trump has been backing off the risk policies which could add fuel to market upside.

First: Tough Words For China

Early on President Trump had harsh things to say about China:

"We can't continue to allow China to rape our country, and that's what they're doing."

In response to Trump's harsh words China swung back. In their state-run paper, The Global Times, they responded,

"There are flowers around the gate of China's Ministry of Commerce, but there are also big sticks hidden inside the door ― they both await Americans."

China was ready to enter a trade war or an actual war.

Trade War Was An Imminent Risk Of The Trump Presidency

The trade war tumult has been intense, with Trump proposing a 45% tariff on Chinese goods and China vowing to hit back. There was plenty of bearish talk about economic casualties on both sides.

China threatened to cut off Boeing (NYSE:BA) and Apple (NASDAQ:AAPL) purchases. Big Box retailers like Wal-Mart (NYSE:WMT) would also be significantly impacted by higher import costs from a tariff.

But Trump Backs Off China

But more recently President Trump has been backing off. That is a huge change.

After originally calling the "One-China" policy up for negotiation he has reaffirmed his commitment.

He has also yet to officially name China a currency manipulator which was promised as a "day one" move of his taking office.

After a recent phone call with President Trump, China's President Xi Jinping said,

"The two countries are totally capable of becoming good cooperative partners."

The backing off of these grave moves by the US President reduces the risk policies from his agenda. That allows the more bullish policies to shine through.

Trump Backs Off Japan Too

Another sign that trade war threats are fading is Trump's handling of Japan.

President Trump recently said:

"You look at what China's doing, you look at what Japan has done over the years. They -- they play the money market, they play the devaluation market and we sit there like a bunch of dummies."

Previous to that he said about Japan,

"They're all taking our jobs."

After a golf outing, dinner and hosting Japan's PM and wife at his country club, President Trump has been mum on the subject of currency and jobs.

Reduced Market Risk

The trade war was the big risk of a Trump presidency. The easing of trade fears will be bullish for the market. President Trump has shown intentions to implement harsh measures but a willingness to back away from such huge market risks.

Reducing the "risk policies" allows the bullish policies to shine.

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Disclaimer:

ETFs reported by Elazar Advisors, LLC are guided by our daily, weekly and monthly methodologies. We have a daily overlay which changes more frequently which is reported to our premium members and could differ from the above report. Portions of this article may have been issued in advance to premium members. All investments have many risks and can lose principal in the short and long term. This article is for information purposes only. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC and their related parties harmless. Any trading strategy can lose money and any investor should understand the risks.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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