There’s a big difference between campaigning for president, and actually being president.
That’s a lesson Donald Trump has learned over the past couple of weeks. Especially since he suffered his first policy defeat with the failure of the GOP healthcare plan.
Perhaps it was this defeat that has the president easing up on one of the biggest boogeymen of the 2016 campaign … the North American Free Trade Act, or Nafta.
Recall that during the campaign, Mr. Trump consistently spouted the anti-Nafta line. He called the President Clinton-era trade deal a "disaster," and a "catastrophe," and "the worst trade deal the U.S. has ever signed."
With such animosity toward Nafta, you would think the president would be in favor of stripping the deal of its most-controversial features.
But that’s not exactly what’s being floated by the administration.
In fact, according to a Wall Street Journal article, a recent draft of proposed changes to the deal suggests that the Trump administration is seeking only "modest" changes to Nafta.
Here’s the key paragraph from the WSJ piece:
According to an administration draft proposal being circulated in Congress by the U.S. trade representative’s office, the U.S. would keep some of Nafta’s most controversial provisions, including an arbitration panel that lets investors in the three nations circumvent local courts to resolve civil claims. Critics of these panels said they impinge on national sovereignty.
The WSJ also writes that the U.S. isn’t planning to use the Nafta negotiations to deal with disputes over foreign-currency policies or to hit numerical targets for bilateral trade deficits. The latter has been a goal of many trade hawks within the administration.
The article went on to assess the draft proposal in the following fashion:
The document appears to be a compromise between the desires of trade hawks to use Nafta renegotiations as a way to set a new trade agenda and moderates who back the U.S. traditional commitment to free trade. U.S. lawmakers are split along those lines as well.
"Compromise" isn’t how I would describe the Trump campaign rhetoric on this issue.
Yet it does seem as though the proposal being circulated now is just that. As one economist told the WSJ, "The proposal looks to be very in line with existing U.S. trade laws."
In what was somewhat of a contrast to the Nafta document, today the president signed executive orders to examine the causes of U.S. trade deficits around the world.
These executive orders also may clear the way for tighter trade enforcement when countries such as China violate trade policies and try to drive down prices and hurt American companies.
So, how will the markets interpret these mixed messages on trade?
We’ll have to see in the weeks to come. But I suspect a lot will depend on just what the final approach to any actual Nafta adjustments look life.
If the approach is more like the "modest" changes floated in the proposal, then markets will likely smile.
Speaking of having something to smile about, our small-cap mining expert Sean Brodrick gives us something big to look forward to in Q2 …
Mining for Money
And the Winner of the First Quarter is …
By Sean Brodrick
Silver. Yep, that lustrous metal kicked the collective butts of all other major asset classes in the first quarter. Silver rallied 13.5% in Q1. Then it dropped the microphone and walked off the stage.
Just kidding. Silver will be back. I believe we’re looking at a heck of a year.
Emerging markets, as tracked by the iShares MSCI Emerging Markets (NYSE: EEM) came in a close second, up 12.3%.
Some other early leaders, though, faded like acid-washed jeans.
For example, banks, as tracked by the SPDR S&P 500 Bank ETF (NYSE: KBE), roared out of the gate after the presidential election. But banks hit a wall in the New Year. Banks are actually down 1% for the year, as measured by the KBE.
Oil? Nah. Down 6%. I’m not even going to put it on the chart. Small-caps? Just a 2.61% gain. Sad. Big brother S&P 500 (Total Return Index) left the small-caps in the dust with a 6.1% gain.
But tech nearly caught up with the emerging markets. The QQQ was up 11.8% for the quarter.
But how about gold? A gain of 8.1%. Not nearly as much as you might think.
Frankly, gold hasn’t impressed me this year … yet. Heck, healthcare, as tracked by the Health Care Select Sector SPDR (NYSE: XLV), managed an 7.8% gain, despite being whipsawed by the Obamacare replacement fiasco in Washington, D.C.
But there’s something brewing that tells me that gold’s best days are yet to come. More on that in a bit. First, a chart of the winners.
On this chart, I’ve put the S&P 500 (the black line) and the other asset classes outperforming it.
But the big question is, what will outperform going forward?
Well, I have one chart to answer that. Have you seen what’s happening with inflation?
In fact, headline inflation, as measured by PCE index that the Fed favors, is now above the Fed’s 2% target. That’s the first time that has happened since 2012.
The so-called core rate of inflation that strips out food and energy, meanwhile, rose 0.2% in February. The core rate has climbed 1.8% in the past 12 months. Still pretty hot. As if you can live without food and energy.
So if you’re putting together your bets for the rest of the year, you might want to pick something that can do well in inflation.
Some ideas: Real estate … energy … GOLD!
And silver, too. I’ve told you how silver acts like gold on steroids. Or maybe gold without its meds. When gold is rising, silver soars. When gold slumps, silver falls into the pit of despair.
Hey, did you know we’ve hit peak production for both metals? I told you in a previous article how the world has hit Peak Silver. Now, the fine folks at GFMS Thompson Reuters just dropped a bombshell. The world hit Peak Gold, too!
When supply of something shrinks, what usually happens to prices? Hmm …
Now add in inflation, and gold’s role as a historic hedge against it.
Bottom line: Things are looking good for both metals. And the miners that produce them. You’ll want other things that do well in inflationary times, too.
And it’s not just the U.S. that is seeing more inflation. Inflation is heating up all over the world.
For a long time, investors thought the Inflation Beast was dead. Nope. The Beast is back. Be ready for it.
I want to know what you think, so if you have a comment or question about today’s Afternoon Edition topic, or any of the topics we cover, let me know. All you have to do is leave me a comment on our website or send me an e-mail.
It’s not only the last trading day of the month, but also the first quarter. And what a quarter it was …
• Broader market gains: The Dow gained 4.6%, the S&P 500 advanced 5.5% and the Nasdaq surged 9.8%.
• Big quarter for techs: Apple (AAPL) was the heavyweight with its whopping 24.1%. The stock currently trades at an all-time high. Amazon.com (AMZN) is also at an all-time high after gaining 18.4% in the first quarter.
• Not only were our 10-Minute ETF Trader subscribers invested in tech this month, but they were also in the quarter’s second-best-performing sector: consumer discretionary. That segment gained 8% in the year’s first three months. Meanwhile today, our members banked a 1.8% gain in just four weeks. Our trading model tells us exactly where to expect market strength in the coming month. See where the smart money is set to flow in April, and how you can follow it >>
• Gold gained 8.1% in Q1. When it comes to first-quarter performance, the yellow metal gained eight out of 10 times during the past decade.
• Oil was Q1’s worst performer, falling 6%. Black gold stayed in a tight range, torn between OPEC’s production cuts (bullish) and rising production/supply in the U.S. (bearish).
• Does Dandelion get a gold watch? Here on National Crayon Day, Crayola said it is retiring that color from its 24-count box. And the retirement party will last for four weeks on Crayola’s website, where you can follow "Dan D.’s" adventures. Dandelion’s replacement "will be part of the blue family," and the company plans to consult the public to name the new shade.
Good luck and happy investing,
Uncommon Wisdom Daily