The Ringling Bros. may have pulled up the stakes for good, but the circus is in town today in Washington, complete with all of the usual attractions including an orange elephant, who at 12 noon will “trump”et to an awestruck crowd. As you take in the spectacle don’t forget Citi’s warning:

We caution that for a number of reasons, market participants accustomed to decoding heavily word-smithed Fed commentary should be wary of applying the same prism to comments from the new administration.

Right. And they should also “be wary” of interpreting Chinese GDP data. Overnight, we learned that China’s flagging economy grew 6.8% last quarter and 6.7% on the year – the annual growth rate was the lowest since 1990. 

(Bloomberg)

You can read the full breakdown in “Big Trouble In Little China,” but suffice to say that an epic currency devaluation and record debt haven’t been enough to buoy the export-driven economy and the protectionist policies of the incoming administration in the US aren’t likely to help matters. The PBoC “temporarily” cut RRR for five big banks on Friday to head off seasonal liquidity constraints.

Meanwhile, Janet Yellen reiterated her (hawkish?) message from Wednesday afternoon in the Fed Chair’s second speech in as many days on Thursday. The market initially interpreted her remarks as supportive of further hikes (she warned against the dangers of running the economy hot) but later decided to key in on the notion that she doesn’t see the Fed as “behind the curve.” Of course this is just the spin the media are putting on it to explain every blip in the dollar overnight. Here are the highlights from the speech – you can decide for yourself whether it was hawkish or dovish (via Bloomberg):

• Fed Chair Janet Yellen says “prudent” to gradually adjust policy over time; warns of risks in waiting too long to tighten, running economy “hot.”
• On question of whether monetary policy has fallen behind curve, “short answer” is “no,” Yellen said in text of speech Thursday at Stanford University in Stanford, Calif.; signs of overheating in broader economy are “scarce”
  • Even so, waiting too long to tighten could require FOMC to eventually raise interest rates rapidly, disrupt financial markets, push economy into recession
• Economic growth is unlikely to “markedly” pick up in near term, given weak overseas demand and other factors
  • Global growth will have “important bearing” on neutral rate; path of neutral rate is “highly uncertain”; “scope for surprises is considerable”
  • “Cautiously optimistic” that some forces holding back GDP growth will abate, yet they should continue to restrain overall growth in medium term
• Downward pressure on long-term rates exerted by Fed’s asset holdings should diminish over time; such development would amount to “passive” removal of policy accommodation
• Possible changes to fiscal policy remain uncertain, are one of many factors that will influence course of monetary policy in next few years
• Sees some further strengthening in labor market as economy expands at moderate pace
  • Labor utilization is close to estimated long-run normal level
• “We are closing in on our 2% inflation objective”; inflation should move to 2% in next couple years
• Allowing economy to run “markedly and persistently ‘hot’ would be risky and unwise”
• Asymmetric risks arguably call for more gradual path of rate increases than indicated by a simple policy rule
  • Shouldn’t follow rules “mechanically” since that could have adverse consequences for economy
• FOMC sees policy stance as “modestly accommodative”

Asian markets were mixed after the Chinese GDP data. Investors are likely waiting to see what Trump emphasizes today at the inauguration: “make America great again” via fiscal stimulus, or “make trade hard again” via tariffs and protectionist trade policies. 

• MSCI Asia Pacific down 0.1% to 140
• Nikkei 225 up 0.3% to 19138
• Hang Seng down 0.7% to 22886
• Shanghai Composite up 0.7% to 3123
• S&P/ASX 200 down 0.7% to 5655

In Europe, the mood was similarly cautious as shares moved between gains and losses ahead of Trump. “It’s clear that investors have reached a level where they are prepared to wait and see what the Trump administration has to offer,” one analyst told Bloomberg. Although Thursday’s Draghi presser turned out to be more interesting (at least in FX markets) than we might have anticipated, it really is all about the Donald this week.

Here’s a summary of where things stand going into the US session:

• S&P 500 futures up 0.1% to 2265
• Stoxx 600 little changed at 362.78
• US 10-yr yield up 3bps to 2.5%
• Dollar Index up 0.16% to 101.31
• WTI Crude futures up 1.2% to $51.98
• Brent Futures up 1.2% to $54.79
• Gold spot down 0.3% to $1,201
• Silver spot down 0.9% to $16.87

I’ll leave you with one last quote from Citi regarding the inauguration: