Its December, so let’s review the big picture before everyone issues their yearly forecasts.
The global economic landscape continues to evolve rapidly, with significant developments on both sides of the Atlantic. In the U.S., Trump’s return to the political stage is generating optimism, as his administration looks to assemble a high-calibre team aimed at stimulating economic growth. Confidence is surging, particularly among investors, as the policy direction suggests a focus on deregulation, pro-business initiatives, and economic revitalization.
Across the Atlantic, however, the story is quite different. France’s struggles under Macron are emblematic of the need for deeper structural challenges within the European Union and the Eurozone. While some commentators frame this as a uniquely French issue, it’s clear the challenges extend to the broader EU framework. The disconnect between the Brussels establishment and the realities faced by member nations has led to growing scepticism about the EU’s long-term cohesion. The centralizing tendencies of EU leadership, often at odds with national interests, suggest that reforms will likely come only after considerable public and economic strain.
From an investment perspective, the divergence is striking. The relative strength of the U.S. economy makes a compelling case for favouring assets tied to the western side of the Atlantic while adopting a more cautious stance on Europe. This is particularly relevant given the uncertainties around Eurozone growth, especially with major players like Germany and France showing signs of economic vulnerability.
In the UK, scepticism around fiscal leadership under the current under-qualified Prime Minister and Chancellor adds to the bearish sentiment. With limited financial experience at the helm, it’s difficult to envision a robust recovery narrative for the UK in the near term. The UK’s investment outlook remains muted.
On the currency front, the Euro faces an uphill battle. Efforts to talk up its value face the harsh reality of stagnant growth and political instability in key member states. Germany’s manufacturing woes and France’s political problems weigh heavily on the outlook. Contrast this with the relatively more robust U.S. growth trajectory, and it becomes clear why many investors are increasingly bearish on the Euro. And why those of us based in Europe, hedging against further Euro depreciation remains a prudent strategy.
Turning to alternative assets, the EU’s hostility toward cryptocurrencies is worth noting. Bitcoin, despite its volatility, continues to attract attention as a hedge against traditional financial instability. As the EU remains strongly anti cryptocurrencies, contrarian investors may find BTC an appealing opportunity. Although Bitcoin’s path is unlikely to be smooth, its longer-term potential remains attractive.
Gold, meanwhile, seems poised for a near term correction. However, this may present an opportunity to increase exposure rather than reduce it. Any significant weakness could be a chance to buy, as the metal remains a reliable store of value amidst increasing global uncertainty.
Commodities are also drawing increased interest, with tangible assets expected to gain traction in the months ahead. Although the strengthening U.S. dollar could introduce headwinds, selective opportunities in commodity markets could prove rewarding. A measured approach, particularly over the next few weeks might prove profitable as we near spring.
Finally, the broader financial landscape is clouded by political uncertainty and potential policy missteps. Central banks, particularly in the U.S. and Europe, remain under scrutiny. While discussions of lower interest rates dominate headlines, central banks rarely act with perfect timing or precision. Inflationary pressures from the U.S. remain a wild-card, and this will likely shape market dynamics in 2025.
In summary, the investment environment is increasingly polarized. The U.S. offers a more promising growth outlook, while Europe faces structural and political challenges. For investors, maintaining a diversified portfolio with a focus on tangible assets, selective commodities, and hedges against Euro depreciation will be critical in navigating the uncertainties ahead.
As you know, I rarely post charts or highlight levels in markets I’m not actively trading. However, I’ve decided to contribute to the weekly Chart Book issued by SGT. My focus will remain on the major products, but I’ll also include charts for other markets, along with key levels for you to consider.
How effective this will be remains to be seen, but my hope is that it provides some value in supporting your trading decisions.
If it doesn’t, please don’t hold it against me – I don’t have the benefit of a Biden-family safety net to bail me out if I make a misstep!
The post The Big Picture: Too Much to Take In first appeared on JP Fund Services.
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