The US administration is busily striking trade deals with key commercial partners. First, US-Japan signed a new trade deal with Japan on July 23. The new baseline tariff rate is 15 percent, just five points higher previous baseline rate.
To acquire this favourable import duty, Japan promised to invest more than $550 billion in key US industries, such as semiconductor and critical minerals. At the same time, Asia’s third largest economy will purchase a significant amount of American products such as Boeing planes, Alaskan LNG, and agricultural output.
Certainly this agreement reduces investor anxieties all around. Japanese shares surged as soon as the event was announced. Topix hit record highs. Singapore also rallied sharply.
Riding high on this new trade ‘win’, US announced another trade deal with the European Union over the weekend, with a similar tariff rate of 15 percent. The EU will, like Japan, buy $600 billion worth of US goods across sectors. President Trump praised this as “the biggest deal ever reached in any capacity, trade or beyond trade.”
Investors again rejoiced. This bullish sentiment is amply reflected in those single-country ETFs. Upside breakouts, uptrend reassertions and records levels all attest to relentless investor buying. What a dramatic change in investor outlook since April.
FTSE Rally Drags Long-term Underperformers Higher
In last week’s Macro Weekly, the “Buy British” theme was discussed at length. What caught my attention since then was the sharp rebound in a few dreary UK large caps.
Take BT Group (BT.A). For years, its share price has languished at the lows. Promising liftoffs all ran out of steam quickly; prices duly crashed back to the floor.
Not this time. Prices surged 10 percent last week and cracked the £2 ceiling. This upward dynamic at critical ceiling possibly ended the decade-long bear trend, a trend that created much grief for long-term BT shareholders (as prices plunged 80 percent from peak).
Vodafone (VOD), another long-term underperformer, also stirred to life with a rally into 52-week highs. The last advance generated a base breakout.
When long-term underperformers suddenly turned around and zoomed higher, it tells us something is afoot. In the words of the legendary trader Darvas, who penned the must-read trading book How I Made $2 Million in the Stock Market, observed (p.38):
If a tempestuous beauty were to jump on a table and do a wild dance, no one would be particularly astonished. That is the sort of characteristic behavior people have come to expect from her. But if a dignified matron were suddenly to do the same, this would be unusual and people would immediately say, “There is something strange here— something has happened.
Jackson is a core part of the editorial team at GoodMoneyGuide.com.
With over 15 years of industry experience as a financial analyst, he brings a wealth of knowledge and expertise to our content and readers.
Previously, Jackson was the director of Stockcube Research as Head of Investors Intelligence. This pivotal role involved providing market timing advice and research to some of the world’s largest institutions and hedge funds.
Jackson brings a huge amount of expertise in areas as diverse as global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
Jackson has a PhD in Finance from Durham University and has authored over 200 guides for GoodMoneyGuide.com.
To contact Jackson, please ask a question in our financial discussion forum.
