In my last write-up for Crush The Street, I discussed the inversion of the yield curve and why it matters. Long story short, this circumstance represents a non-sensical economic reality. Essentially, it comes about when investor fears become the predominant sentiment in the markets. Yet before contrarians advantage this situation, you should be aware of a potential head fake.

For instance, right now, it’s tempting to jump into precious metals. Over the last few weeks, both gold and silver prices have turned up considerably. Moreover, the Federal Reserve just gave the green light for these safe-haven assets to move even higher. Following the logic, I wouldn’t be surprised to see these metals both reach all-time highs.

It seems impossible that the feds have an answer to the coming problems ahead. For example, what the U.S.-China trade war exposed is that no real economic superpowers exist. However, most nations silently suffer through the façade because of the practicality of the U.S. dollar. But now, China is demonstrating open rebellion, a circumstance for which we apparently were unprepared.

Nevertheless, we’re heading toward an extremely contentious presidential election year. As such, the Trump administration could drive home a negotiation which would bolster the markets. That’s the political head fake that I see coming, and it’s a very realistic scenario.


Head Fake May Only Lift Markets Temporarily

If I may be blunt, politics is nothing more than pre-manufactured drama. Sure, President Trump supposedly aligns himself with true conservative values. But deep down, we know that this is a high-level charade.

After all, it wasn’t too long ago that Trump was a Democrat. Even his kids were registered as Democrats, and therefore couldn’t vote for their father in the primaries. But because of the divisiveness at the time (and still ongoing), conservative voters were willing to put that gaffe aside.

I mention this not to slight the President but to reinforce the fact that he’s human. In order to have the best chance of election in 2016, Trump deliberately ran on the Republican ticket. That tells me that he cares very much about gaining and maintain power.

As a result, I see him doing whatever it takes to lift the economy from its present doldrums. If that means kissing Chinese ass in order to win next year’s election, so be it. He would have another four years to toughen up his image.

And that’s why I believe an economic head fake is coming. However, merely shaking hands for a photo-op won’t fix anything. Deep fissures in our markets exist, and we will almost certainly incur some kind of correction.