However now that U.S. President Joe Biden has withdrawn from the presidential race, Vice-President Kamala Harris, a youthful candidate, seems set to inject new vigour into the scuttled Democratic Celebration.
With that, the ‘Trump Commerce’ is cooling.
Early polls already trace {that a} Harris vs. Trump election will probably be tight. That’s in accordance with Reuters on Wednesday.
So, what does that imply?
Traders at the moment are as clueless as ever concerning who may win in November.
It comes again to what Warren Buffett says about mixing politics together with your funding methods… Don’t do it!
And it seems just like the Oracle of Omaha was spot on once more.
Anticipate extra volatility into November
In Australia, we’re considerably sheltered from the spectacle unfolding within the States. However as commodity traders, we will’t ignore it altogether.
The world’s largest financial system leads the Western rhetoric on struggle, geopolitics, renewables, nuclear energy, and commerce tariffs. All of those ‘massive points’ impression the commodity market.
Take lithium. A Democratic win will doubtless result in additional improvement of renewables, EVs, and lithium-ion batteries. That might trigger a rally in lithium shares on the ASX.
Nonetheless, underneath a Republican administration, fossil gas corporations would flourish, given Trump has been a vocal supporter of home oil and fuel manufacturing.
Echoing former Alaskan Governor Sarah Palin, Trump’s power coverage may be summarized in three phrases: “Drill, child drill!”
Attempting to guess who may win on this coming election and aligning your portfolio accordingly is a idiot’s recreation.
Every candidate has diverging insurance policies with various implications for commodity markets, significantly these linked to power.
But, by the fog, some political agendas look much more sure no matter who wins in November.
Temperature rises on China-US relations
On the Republican Nationwide Conference final week, Trump and his newly minted operating mate, JD Vance, ramped up the “America First” narrative. Not surprisingly, each politicians had been eager to parade China because the unhealthy man.
There’s little doubt {that a} Trump-Vance management would search to accentuate commerce wars in opposition to China, one thing Trump initiated when he took workplace in 2017.
Nothing rallies a nation like a standard enemy, and Trump seems set to juice this technique once more. However amping up hostilities could possibly be superb for one space of the commodity markets — vital minerals.
China holds a agency grip on provide of uncommon earths, graphite, and cobalt due to its mining and processing dominance. So, why would all these shares do effectively underneath rising tensions?
Vital minerals stay China’s only software in opposition to Western commerce hostilities. For probably the most half, it’s stored this ace up its sleeve.
Nonetheless, as strain mounts on the Center Kingdom, the likelihood of China weaponizing its commerce dominance over these key supplies grows. These minerals are essential for modern-day manufacturing, from defence, tech and renewables.
After a 12-month hiatus, shares tied to this group of commodities might return with a vengeance if Trump raises the temperature on U.S.-China relations.
The important thing shares to observe will probably be corporations already in manufacturing or capability to produce the West with an alternate provide inside three to 5 years.
Just a few names come out right here, together with Lynas (ASX: LYC), Arafura Uncommon Earths (ASX: ARU) or the superior graphite developer Renascor (ASX: RNU).
So, what in regards to the different aspect of the political divide?
That is the place you don’t want to use a lot political guesswork.
The hardline stance in opposition to China is without doubt one of the few bipartisan insurance policies amongst Republicans and Democrats.
Whereas the world barely is aware of what to anticipate from Harris, up to now, it seems as if she’ll comply with together with Trump’s China-bashing model.
Right here’s an extract from one in all her speeches in late 2022 after visiting Japan:
“China is undermining key components of the worldwide rules-based order. China has challenged the liberty of the seas. China has flexed its army and financial may to coerce and intimidate its neighbours.”
“We are going to proceed to fly, sail, and function undaunted and unafraid wherever and every time worldwide regulation permits.”
And in 2019, she co-sponsored the Hong Kong Human Rights and Democracy Act, which goals to advertise human rights in Hong Kong and sanction officers concerned in “undermining Hong Kong’s elementary freedoms and autonomy.”
These statements actually aren’t profitable any associates in Beijing.
So far as I can inform, the U.S.’s ramp-up in opposition to China is as near a positive guess as you will get, no matter who wins.
— James Cooper is a geologist primarily based in Australia who runs the commodities funding service Diggers and Drillers. You may as well comply with him on X @JCooperGeo.