Market Update

Trump, Commodities & Evolution

Good afternoon

Trump is making one thing very clear: He will kick-start the economy, and he will do it via massive fiscal spending. He will ONLY do, though, what is good for American people...

The US obviously are still the largest economy in the world - but tehy are NOT the largest consumer of commodities, as we all know. China is 3x larger than they are in that regard. The kind of spending he seems to have in mind would certainly be quite commodity-intensive, making his plans very positive for us as resources investors. All this is happening at a time, when general investors have no or very little exposure to the sector. So in my opinion, we will see a continued move from asset allocators into our space. 

What we do not know, though, is the potential impact on China. In fact, we do not even know, what Trump exactly is going to do with regards to free trade etc....But the above is not necessarely a one-way street only....we should not become too exuberant - even though there is certainly a lot opf reason to be positive on resources.

In the longer run, though, Trump might have a real problem in financing his spending spree. His relationship with the Fed is very difficult, and it got to be seen as very questionable, whether the world or the Fed will actually be happy to finance his deficits. Beside of that, I think higher wage-growth, and higher inflation generally will be a sure bonds will see a massive sell-off for many reasons over the enxt 12 month - in itself creating potentially lots of problems for housing markets, banks, and many indebted corporates - and certainly for many indebted people!

So - while all looks so good in the markets, this is not a one-way street, and we have lots of potential issues ahead - and that is not even talking about foreign politics, which will see massive changes over the next 12 month as well. what I am coming down to is: In this frenzy, do not forget gold!! Strangely enough, everybody is suddenly terribly positive on the impact of Trump, and equity markets are celebrating the better growth outlook. We are just about to enter the most volatile, political landscape since the second world war.....los of very large risks will do well! For now, it´s least as I am writing, it´s tarding at 1266, which is disappointing - while equity markets are lso coming back - and base metals still strong, but below the highs from this morning. Feels like the morning after!

Evolution - while tehy have been receiving a positive response to their last aquisition, effectively the gold- and 30% of the copperstream of Ernest Henry´s production, they have not really had much attentiaon given to the copper stream....30% of Ernest Henry is equal to about 20.000t of yearly copper production. Compared to the price of copper at the time of teh deal, that´s roughly an additional 20 mill$ income p.a. at current prices - quite meaningful. And the way Trump seems to push the economy, there might be much better prices ahead in 2-3 years. Again - all provided, that Trump does find a deal with China....