I guess you can kind of look at Wednesday’s Trump presser as a study in errors of commission versus errors of omission. The President-elect committed the latter. Or at least according to the reaction in the dollar.
The market consensus is unequivocal. Trump didn’t talk about fiscal stimulus or the economy at all really. We did want to hear about Russian hacking because, you know, that’s entertaining, but we also wanted some substance.
But as at least one trader noted on Thursday morning, our interpretation of the event was probably colored by our own inherent biases. That is, Trump is so polarizing that invariably our judgement of his performance will always lack nuance.
Below, find some additional color on the event (because we just have to overanalyze it) from Bloomberg’s Richard Breslow and SocGen, respectively.
There are many ways to look at most issues. What we like to call nuance. In today’s world, sadly, there’s only thumbs-up or thumbs-down. It’s like living in the Roman Colosseum. Yesterday’s press conference was a disaster of arrogance and misdirection, or it was a tour de force where he taught the press a right, good lesson. What we got was what we should have had as the base-case expectation. He actually ran an honest campaign. And that’s what scares a lot of people.
- The take-aways from this should be, he is who he claims and it’s unwise to project any other persona on him. And that what Americans are hearing, and in many cases hoping for, is not what people outside of the country can believe is happening
- The other lesson not learned is that at a press conference, you can’t hope to get the questions you want to have answered unless you ask them. If investors were left disappointed on details relevant to the economy and policies, it’s because no one raised the issues in any substantive way
- Interestingly, whether you agree with anything said or not, it might be useful to note for future day trading that S&P 500 futures sagged on Russia and conflicts of interest and bounced every time he went back to the campaign’s speech points
- I wonder what they might have done had someone asked him the same South China Sea question posed to Secretary of State- designate Tillerson at his confirmation hearing. One thing I can tell you is which question and which answer was being discussed in the Chinese press today
- I’ve read any number of stories this morning saying Trump trades unwind on disappointment with press conference. Meanwhile, it won’t be lost on the President-elect’s team that after the event, the Dow rallied almost 100 points, the 10-year auction was strong even with big primary issuance and the dollar was off a bit, which they won’t mind at all
- There may be many people rating it “dislike”, but all he’s hearing is “great job, boss”. And that’s the rub
Global markets had been whipped into a furore by expectations of a large US fiscal stimulus since Trump’s victory, but scant details have so far been provided. Trump’s press conference yesterday was dominated by various Russia-related allegations, but what happens in Moscow stays in Moscow as far as the markets are concerned. There was mention of a border wall and a “border tax”, but virtually no mention of any fiscal stimulus. The Congressional Republicans similarly appear more focused on dismantling Obamacare at this point.
Consequently, the unwind of the fiscal-induced trades continue, and the US dollar dropped as US yields corrected further. The Mexican peso stayed under pressure as Trump apparently affirmed his intentions regarding a wall and renegotiating NAFTA. However, the dollar has broadly retreated. Just as yen proved to be more sensitive to US bond yields when those were going up late last year, it is similarly proving more sensitive as those yields fall back. The 20-day rolling correlation between USD/JPY spot and the UST 10Y yield is above +0.90 currently, the highest reading since 2008.