What to Expect in the Second Quarter – Introduction
With the first quarter gone, all investors are now looking forward to the second quarter. Sadly, it started on the wrong footing with the stocks in the United States falling by more than 2%. However, this could be a good sign if we compare it with what happened in the first quarter, when stocks started by going up. Here is what we can expect from the coming quarter.
First, investors will be paying close attention to the White House. In the first quarter, Trump moved to reshape his administration by eliminating the globalists in the White House. He got rid of Rex Tillerson, H.R McMaster, Gary Cohn, Richard Shulkin. Other close aides like Hope Hicks also left. He replaced them with key allies like Larry Kudlow, Michael Bolton, and Mike Pompeo. Traders will want to see how the new team works to reshape the administration’s priorities.
Traders will watch out for the upcoming meeting between Donald Trump and North Korean leader, Kim Jong Un. In the last quarter, North Korea made some overtures by participating in the Olympics. The leader also travelled to China and also announced that he would meet the South Korean leader. In May, he will meet Trump. This will be the first time in history that the presidents of the two countries have met. It will be an interesting thing to watch after the two leaders engaged in unique diplomacy an year ago.
Trade issues will also be watched closely. As you recall, Donald Trump imposed tariffs on steel and aluminum. He also moved to impose heavy tariffs on Chinese goods. To respond, the Chinese government also unveiled a list of targeted goods that they will impose tariffs on. This trade war is likely to accelerate after Trump announced that trade wars are good. His logic was that since the United States has a higher deficit, it would not be hurt as much as China which has a large trade deficit with the US.
In the quarter, there is a chance that the NAFTA negotiations will come to an end. For years, Trump has blamed NAFTA for all problems facing the country. He has vowed to either get a better deal or tear it down. Recently, he has also declared that immigration issues must be included in the trade deal. Today however, reports emerged that the administration would push for the first phase of the renegotiated deal.
Traders will continue paying a closer attention to the cryptocurrencies. I believe that this is the quarter that will determine the future of the currencies. If they continue falling as they are today, chances are that traders will exit which will cause the bubble to burst. If they start recovering, traders will likely load more of them, pushing the price higher.
Commodities will also be important this quarter. Most importantly, traders will watch out for crude oil and soybeans. The two have had an interesting first quarter with crude oil moving up by more than 8%. Soybeans will be important because they are one of the largest exports to China from the United States. If the trade war escalates, chances are that its price will be highly affected.