MC Trading

In Part One of this research post, we highlighted and discussed the many geopolitical and economic factors that are driving the market price volatility over the past 30+ days in addition to highlighting some of the key elements/factors of the next 15+ days that may continue to drive market volatility higher.  The three key elements we discussed were the US Presidential Elections, the European Elections (European Union Elections) and the US/China Trade Discussions.  Each of these components is big enough to reflect many trillions of dollars in economic output and, individually, each of these components could drive increased price volatility over the next 30+ days.  Combined, should these events somehow combine into a massive disruption event, they could break the backbone of the global markets in such a way that many investors are simply not prepared to discuss or trade.

In our opinion, there are a number of elements to the unfolding global market economics that play into our future expectations.  China becomes one of the biggest unknowns simply because we believe the best information we have at the moment is shaded and hidden in terms of true values.  Let’s take a minute to discuss a few of them…

First, the currency markets are the first area that moves to protect against fears and risks (https://www.scmp.com/economy/china-economy/article/3010364/will-falling-yuan-torpedo-chinas-trade-talks-us).  The FOREX ratios operate as an immediate hedge against debt, credit and future expectations.  The recent decline of the Chinese Yuan represents a massive danger for the Chinese government.  Not only does this create an issue for the population of China, seeing their purchasing power diminish, but it also creates a debt servicing issue for business, corporations, and government on a massive scale.  Servicing their foreign debts just became much more expensive as the Yuan value decreases compared for other foreign currency levels.

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