IN June of 2015, I began talking about how the political/eco-nomic cycle that bottomed in the middle of 2011 was about to peak and will turn down again in October 2015. The bottom of the cycle in 2011 also coincided with the Philippine Stock Exchange Composite Index (PSEi) breaking above its previous historic high below 4,000 and began its run to 8,000 in 2015.
Stock markets have the “supernatural” ability to often move before the events to justify the breakouts and breakdowns. The October 2015 top of the cycle was the beginning of the change in global politics that saw power being transferred from existing political establishments into the hands of individuals like Rodrigo Duterte and Donald Trump.
The political changes that began in 2015 have continued well into 2018. Turkey experienced a coup attempt in 2016 that saw over 300 people killed and 40,000 arrested. Great Britain voted to leave the European Union. Brazil and South Korea removed their presidents —interestingly both women—by impeachment. Emmanuel Macron formed his own political party and became France’s president, shutting out the two traditional parties for the first time in many decades. Xi Jinping effectively became China’s president for life in March.
Last month populist Andrés Obrador became president of Mexico. This is the first time that a candidate not from the Institutional Revolutionary Party or its predecessors has done so since the Mexican Revolution in 1920.
These are not isolated events that happened coincidentally. The names of the western leaders during World War II—Winston Churchill, Franklin D. Roosevelt, Joseph Stalin and Adolph Hitler will be remembered for hundreds of years. Two of the greatest military leaders of their countries and in history—Arthur Wellesley (Duke of Wellington) and Napoleon Bonaparte—fought the Battle of Waterloo in 1815, changing the face of Europe forever.
After the cycle change top of 2015 and the subsequent political events, we recently reached a short-term bottom on July 12th. Is it mere “coincidence” that that is when the PSEi broke from its bottom at the 7,200 area and is now about 5 percent higher?
Argentina recently had to raise interest rates to 40 percent to keep its currency from further collapsing, down 38 percent this year. The Turkish lira has fallen 40 in two weeks. The US dollar index against the major currencies is at its highest level in more than a year.
In 2015 we knew Britain would stay in the European Union, Secretary Manuel Roxas would probably be the next Philippine president and Hillary Clinton appeared guaranteed to be elected president of the United States.
For the past year, the news has been that the US dollar is dead or in intensive care. China will not use the US dollar to buy oil and anyone trading with China must pay in renminbi. Crude oil eventually will not be priced in dollars, killing the “petrodolla.” Trump will depreciate the US dollar to limit Chinese imports.
Now we are moving to the next high in the cycle at the end of November. From there we will go down until January 2020. The political chaos since 2015 will now be economic chaos until 2020. It has begun. Watch the dollar.
E-mail me at [email protected] Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.