Discover what Trump’s protectionist policies, continually low interest rates, and Amazon getting into banking could mean for you and your investments (Reading time 3:53 mins)

This information does not take into account your personal objectives, financial situation or needs. You should consider if the relevant investment is appropriate having regard to your own objectives, financial situation and needs.

 

1. Trump ramps up protectionist policies

Trump surprised the public and his own party by announcing tariffs on steel and aluminum. He’s vowing to impose 10% tariffs on aluminium and 25% on steel.

It hasn’t exactly been welcomed news, with leading members of the Republican party criticising the plan. Business owners and party members alike have pleaded with the president to reconsider his tariff policy; they’ve even openly discussed the potential consequences of a trade war if other countries retaliate.

What does this mean if you’re invested in the share market?

The potential for an imminent trade war is never good news for the share market.

The stock market initially tumbled when Trump announced his plan to impose tariffs, which came as no surprise given free trade restrictions are usually detrimental to company profits.

However, Trump appeared to soften his tone a few days later, and markets have since recovered. As a result of Trump’s more flexible stance on the issue and little party consensus, the share market seems to have parked this in the “Trump says another crazy thing” basket for now.

What does this mean if you’ve invested money with AtlasTrend?

AtlasTrend’s managed funds are not currently invested in companies that produce aluminium or steel which could be directly impacted by Trump’s tariff plan.

Nevertheless, if the tariffs are implemented, there is a risk of a broader trade war. Other countries could retaliate with their own trade or tariff restrictions as a consequence. This uncertainty may have a negative impact on the broader share market.

Uncertainty with Trump’s policies is now the new normal. While we watch it closely, we remain fundamentally positive on the major stock markets around the world.

 

 2. Reserve Bank doesn’t budge on cash rates

The Reserve Bank of Australia (RBA) announced interest rates will remain unchanged at 1.5%, marking the 19th month of its record low. 

Reserve Bank governor Phillip Lowe has indicated the bank is in no rush to raise interest rates from their current level, citing any progress in wages or inflation as merely “gradual”.

What does this mean if you’re invested in the Australian share market?

Official interest rates are effectively the official cost of money in the financial system. The higher these rates are, the more it typically costs you and companies to borrow money.

The reserve bank leaving official interest rates unchanged is partially good news for the share market; higher interest rates tend to lower revenues and profits for some listed companies.

If you’re invested in the Australian share market, you might want to consider its growth prospects given the RBA is acknowledging Australia’s economic growth as underwhelming.

What does this mean if you’ve invested money with AtlasTrend?

AtlasTrend’s managed funds do not invest in Australian listed shares.

However, Australia’s official interest rates can impact AtlasTrend’s managed fund investment returns due to potential currency movements.

If the RBA continues to hold interest rates at 1.5% for many months to come, and other developed economies like the US continue to raise their interest rates, there could be downward pressure on the Australian dollar.

This would lead to a higher value for AtlasTrend’s managed fund investments, since those funds invest in shares denominated in currencies such as the US dollar.

The opposite is also true. For instance, if the reserve bank raises interest rates unexpectedly, it is likely to cause an appreciation of the Australian dollar.

 

 3. Amazon’s foray into banking

There’s no denying Amazon is serious about making the customer experience as simple, seamless and frictionless as humanely possible. The retailers’ recent talks with JPMorgan Chase is a testament to these ambitions.

Teaming up with a big bank would allow Amazon to reduce payment processing fees and get closer to their customers without the middleman. An Amazon-branded bank account might not be too far away.

What does this mean if you’re invested in bank stocks?

When Amazon is rumoured to be entering a new industry, it’s usually bad news for existing companies in that industry.

However, we believe banking is quite different given profits are made through managing the risk and return from money. This is very different to selling goods or services online, which is Amazon’s strength.

It also makes sense for Amazon to partner up with existing banks rather than be encumbered with all the regulations that come with operating a bank.

What does this mean if you’ve invested money with AtlasTrend?

Many of AtlasTrend’s managed funds are invested in Amazon shares.

According to a UPS survey from 2017, more people in the US use Amazon to start searching for a product than search engines like Google.

Since Amazon dominates product search, customer loyalty and brand awareness, it makes sense for them to continue offering more products and services to its 300+ million active customers.

  

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About Kent Kwan

Kent Kwan is a Co-Founder of AtlasTrend, an online investment platform that makes it easy for anyone to learn and invest in trends transforming our world. Kent has over 15 years experience in financial markets including as Chief Investment Officer at Arowana International Limited, and roles at JP Morgan and Macquarie.