The Trump trade is ending, as expected.
The markets completely overreacted to the Trump Presidential win. As I noted previously Trump’s policies will begin to impact the economy 12 months from now at the earliest.
Meanwhile, the financial media and investors have bought into the belief that 5% GDP growth is just a few weeks away!
The sad truth is that the next few weeks are likely to be VERY negative as far as economic announcements are concerned.
First and foremost, while everyone is trumpeting that 3Q16 GDP growth was revised up to 3.5% (not surprising given how important it was to show strong GDP growth for political reasons) 4Q16 GDP estimates have already been revised downward from 3.4% to 2.7%.
And I expect we’ll be seeing it revised even lower in the coming weeks.
The fact is that even if the US were to record a solid 4Q16 GDP growth number, TOTAL 2016 GDP growth is likely to be a measly 1.6%.
Put simply, 2016 was a terrible year for GDP growth. Those who believe GDP growth of 5% is just around the corner are going to get annihilated.
This is particularly true considering the impact of the $USD.
The $USD is already impacting 4Q16 results as I predicted.
Pfizer (big pharma)
Pfizer, the world’s top drugmaker by revenues, has warned that a strengthening dollar would be “a very big challenge” for the company in 2017, raising concerns for US corporations that generate a significant percentage of sales from overseas.
BorgWarner (automotive parts)
Also, the foreign currencies are expected to have a negative impact of $60 million or 2.7%. However, excluding the impact of weaker foreign currencies and the Remy light vehicle aftermarket sale, the year-over-year increase in net sales for first-quarter 2017 is estimated to range between 2.5% and 6.5%.
WalGreens (Drug store)
In the last couple of quarters, Walgreens Boots Alliance’s (WBA) fiscal 1Q17 top line was negatively affected by currency headwinds. The top line fell 1.8% YoY (year-over-year) in fiscal 1Q17.
However, revenue growth at Marriot might get restricted as lingering political uncertainty in key international markets and significant currency headwinds are affecting most of the hotel chains including Hyatt Hotels Corporation H, Hilton Worldwide Holdings HLT, Wyndham Worldwide Corporation WYN, etc.
This will be spreading. I fully expect that 1Q17 economic data will be awful as the impact of the $USD remaining above 100 for months begins to be felt.
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Chief Market Strategist
Phoenix Capital Research