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US Trade Deficit shrinks, totally unexpected

This morning investors were surprised to see a narrowing US trade deficit for October.  Exports are at their highest level in two years – mostly on the back of a declining US Dollar. How does this work? Our dollar is weaker, so our goods are cheaper for outsiders. And those outsiders buy more of our goods. In this case, the outsider is China, who bought a record amount of exports in October. The trade gap is at its lowest since January 2010. But this cheap dollar also means American consumers and businesses will have to pay more for imported goods and raw materials.

All in all, trade deficit is always a mixed bag. But using the HiddenLevers charting tool, I noticed how much correlation there was between Trade Deficit and the US GDP, both up and down over the past 5y.

Trade Deficit and US GDP - going south for winter? -

So I don’t get why people are celebrating – a downward trajectory in the trade deficit means the same should happen to GDP. I used the screener to find some plays based on GDP growth. If your view is bullish on GDP growth, check out stocks like Collectors Universe (CLCT) or RR Donnelly & Sons (RRD). If you are bearish on GDP, check out stocks like O’Reilly Automotive (ORLY) or Capella Education Company (CPLA).

HiddenLevers can help you generate trading ideas, and search for stocks based on your view of GDP growth, and dozens of other economic trends. You can research each stock’s macro profile, and learn which economic levers push on that stock most. Try it free for the first month.

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