The political scientist in me is a little annoyed with some of the overnight Street commentary regarding Trump’s speech.
“It was short on specifics!” traders were quick to shout.
Methinks market participants suffer from a bit of myopia.
That is, when you live and breathe markets, there’s a tendency to tunnel and lose sight of the bigger picture. Trump is f*cking dangerous. So while traders were frustrated that the President didn’t dedicate the entire 70 minutes to expounding on tax reform and fiscal stimulus, the rest of us were just happy that the implied odds of a March mushroom cloud didn’t rise materially.
Indeed, if you buy the Heisenberg narrative, that’s the overriding concern here. That is, it’s geopolitics that’s in the driver’s seat.
And apparently the broader market agrees, as is pretty clear from the overnight action.
Of course there’s no denying that Trump was elected in part based on his economic agenda, so having assured us that he won’t let Steve Bannon hit the nuclear holocaust button anytime soon, the President will now have to double down on the effort to get things moving on growth friendly policies.
Here with more on the above is former FX trader and Bloomberg contributor Richard Breslow.
Via Bloomberg
At the end of the day, it’s true that the devil will be in the details for this administration’s economic agenda. But those complaining of the lack of flip-charts at last night’s presidential address have completely missed the point of the exercise.
- He was talking to a much broader audience than just those of us writing financial commentary. Once you thought to yourself, or worse, wrote, “Why’s he wasting my precious time going on about military veterans? He should be explaining next steps to justify even better P/E ratios,” he had you right in the palm of his hand. And you became Exhibit A for explaining how we came to be here
- To be fair, however, now that the vision thing is out there, the onus falls squarely on his economics team to be the technocrats and arm-twisters they were hired to be. And they won’t be able to pull it off without getting those expensive loafers muddied in the swamp
- Now that the speech is over, the dollar is a bit higher, two-year treasury yields are right at the highest level since 2009, the yield curve is nicely flattening and safe haven gold looks like it may have failed classically at its 200-day moving average. Equities have, as yet, failed to accommodate Chicken Little by collapsing on the thirtieth cue, despite the market priming for a rate hike
- If you hate the dollar, you have to explain away widening short-end yield differentials against the majors. Emerging markets doing well isn’t a sign of dollar weakness
- On a purely technical basis, DXY is making a strong case that the move lower over the last two months was a correction, not a reversal. If today’s move holds, it will have cleared some major hurdles and shorts should be watching the next one-quarter percent on the upside as a last line in the sand. If you’re a seller this is the place with a very tight stop. If you aren’t selling here, you aren’t really bearish
- We get core PCE today and it matters. It’s tradable on a beat or a miss. And won’t take a big one. Governor Brainard tonight can move markets. And everyone and all markets remain on Yellen watch
