Last Friday morning, just before the market was about to take a 2-day swoon, we reported that in Dennis Gartman’s latest letter, the “world renowned commodity guru” had just turned bullish: “We have had derivatives in place to hedge that position, but we’ve been reducing that derivatives position all week long and we are now of course net long of equities on balance.”
Remaining the ultimate contrarian indicator du jour, we were curious if after taking his latest beating, he would flip-flop once again and turn bearish. The answer, as it turns out, is no.
US stock index futures are up quite sharply as we write as the market is now more convinced than ever that Ms. Clinton will win the election following last evening’s debate between she and Mr. Trump. As we have explained here previously, the stock market here in the States is able to convince itself that her left-of-center rhetoric of recent days and weeks is nothing more than campaign rhetoric; that when she becomes the President she will turn away from these recently embraced leftist philosophies and will return to her roots better anchored on Wall Street… or at least that is the hope this morning as the S&P futures are trading 12-15 points higher.
The capital markets can deal with almost any sort of news as long as it has hard, fixed news with which to deal. Mr. Trump was and is the “wild card” of the two candidates, with equity investors uncertain what his protectionist policies would bring to the domestic and the world economy, but fearful that a fully-fledged protectionist Administration under Mr. Trump would devolve into a severe global recession, if not a possible global depression. The talk of late has been properly of Smooth-Hawley, the 30’s and global economic weakness should Mr. Trump prevail in November, and certainly too that has been our fear. The non-victory “victory” by Ms. Clinton last evening has put aside those fears, at least for the moment, and has given way to stronger equity prices as we write. This may be ephemeral, but for now it seems as if the equity market has breathed a sigh of relief, hoping that freer rather than less trade is the future.
Let us be quite clear here; we are not supporters of Ms. Clinton and we shall not be voting for her; but that said, the markets feel less burdened by her economics than they would be burdened by Mr. Trump’s protectionism… the far lesser of two evils in our opinion.
We have not done much in the way of changing our retirement portfolio here at TGL. We remain long of aluminium… which gapped higher three trading sessions ago after a period of sustained weakness… while we are materially hedged with derivatives and with gold sufficient in size to bring our net market exposure to something only very slightly net long.
And now we know. What we don’t know is if Gartman has been stopped out of his recent bond short yet.
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