In his novel, A Tale of Two Cities, Charles Dickens writes, “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness,” to illustrate the duality that existed between the classes during that time period.
Although we live in a much different era, some parallels are quite evident. America is divided. The divide I’m speaking about is not the divide between the wealthy and the poor, although that the divide clearly exists. Instead, it is the divide between two polarized political factions with different, deeply ingrained philosophies of what changes are necessary to make the lives of American citizens better. This chasm widens as a divided country becomes more and more polarized. We are at a point in our history when these two factions are so diametrically different that it seems there are two Americas.
The Honeymoon is Over
In this last week, we have seen market sentiment completely pivot as traders and investors moved away from the short-term optimism which was at the forefront of the current advance in US equities prices. This optimism has now been replaced with concern and uncertainty based on policy implementations by President Donald Trump. Recent Executive orders by President Trump regarding immigration and US trade have put a quick and concise end to the major US equities rally, the primary influence that took the Dow Jones above 20,000. For the third consecutive trading day, we have seen US equities selloff sharply, taking the Dow well below 20,000.
Save Haven Assets Gain Favor
According to Bloomberg News, “President Donald Trump’s policies have brought gold back to life.” This is clearly illustrated by the price increase of gold over the last two days, resulting in the largest monthly gain since June of last year. Gold has gained over $30 in the last three days. After trading to a low of 1180 on January 27, gold is now trading just above $1211 per ounce. This price increase was attributed to both US dollar weakness and safe-haven purchases.
It is division that creates uncertainty and it is uncertainty that has fueled the recent uptick of safe haven assets, as they once again gain favor among traders and investors.
Wishing you as always, good trading,