The Only Question Was When

You knew it was coming. It was always just a matter of time.

That’s what Robert Kaplan told Bloomberg’s Michael McKee Wednesday, while discussing the Fed’s plans to taper monthly asset purchases.

“People are on notice,” Kaplan said. “The only question is when.”

The same has long been true of the Trump Organization and CFO Allen Weisselberg. That is: People were on notice that charges might be coming. The only question was when.

If nothing else, Weisselberg has a special talent for avoiding cameras. There are so few file photos of Weisselberg that you’d think he’d been on the run for the past several decades. Maybe that’s because he has — in a figurative sense, anyway.

Years ago, I profiled Weisselberg in these pages. I’ll eschew the temptation to offer a sarcasm-laden recap. Suffice to say that when it comes to the black box of Trumplandian finances, Weisselberg doesn’t just have the key, he is the key. “Allen is the one guy who knows everything,” a former high-ranking Trump Organization executive told The New Yorker in 2018. “He’ll never talk to you.”

On Thursday, Weisselberg and the Trump Organization itself will be charged with tax-related crimes by the Manhattan district attorney’s office, multiple media outlets reported. It’s been nearly three years since prosecutors launched an investigation into Trump’s company. The expected actions would be the first criminal charges.

“The initial charges won’t implicate Trump himself,” The Wall Street Journal said, citing his lawyer, and noting that the allegations center around taxes on fringe benefits, something former prosecutors described as “unusual” in isolation, but more common when “used as part of larger cases.”

“There’s no indictment coming down this week against the former president,” Trump Organization lawyer Ron Fischetti told the AP, adding that he “cant say he’s out of the woods yet completely.”

Weisselberg’s ex-daughter-in-law is key to the case. In addition to providing prosecutors with copious tax records, she told CNN she’s prepared to testify.

And so it begins. Or ends. We’ll see. If those walls could talk, the stories they’d tell. And if that ex-president could tweet, the rants he’d rant.

Getting back to the Fed, Kaplan went on to regale McKee with the same set of talking points he’s rolled out innumerable times over the past three months. “If we take the foot off the accelerator gently now, we’ll have more flexibility down the road to avoid more abrupt action,” he said. “The efficacy of these purchases [was] very important and helpful in 2020 [and] early this year.”

Yes, “the efficacy of those purchases” (figure below).

The S&P closed out one of its best first halves since 1998 on Wednesday. US equities rose 14.3% from January through the end of June. That, after surging 21% in the back half of 2020.

Global stocks posted double-digit returns in H1. Commodities were the real standout (figure below), even as gains for some raw materials evaporated over recent weeks.

Despite trepidation tied to prospective Fed tightening and “Delta” variant concerns, folks generally want to stay exposed to the reflation trade.

Although some have suggested reflation (as a theme) is past its sell-by date, there’s still a sense among many that the economic “renaissance” hasn’t even arrived yet. Hence speculation that there’s plenty of gas left in the reflation tank.

“Many remain focused on staying in the reflation trade because they remain adamant believers in persistent inflation pressures,” Nomura’s Charlie McElligott said Wednesday.

“That said, most Macro clients [say] they currently prefer non-Rates ‘reflation’ expressions right now, after many saw some fingers and limbs blown-off in June and are de-grossed and gun-shy,” he added, referencing the dramatic bull-flattening episode that unfolded post-June FOMC. McElligott flagged demand for “wingy upside in XLE-type trades,” which he said “remain preferred pockets of ‘reflation overshoot’ expressions and hedges.”

“The situation is similar to February’s B.1.1.7 scare, when defensive positioning (bonds, growth stocks) in anticipation of doom resulted in a month-long rally in value and cyclical stocks and a decline in bonds and growth stocks,” JPMorgan’s Marko Kolanovic remarked, referencing investor angst around the COVID “Delta” variant. “We expect this to repeat [and] reiterate our view to go long reflation, cyclical and value trades,” he added.

It’s worth noting, as something of a parting shot to H1, that the dollar just had its best month in quite a while. That’s obviously a function of the Fed’s (relatively) hawkish tilt and doesn’t exactly bode well for reflation.

“Investors will have a much clearer understanding of the way in which the real economy has emerged post-pandemic once Labor Day has passed and the incentives to return to normal begin outweighing the lure of remaining on the sidelines,” BMO’s Ian Lyngen and Ben Jeffery said Wednesday. “Admittedly, the prospect of continuing to await greater economic clarity offers little tradable insight as the long holiday weekend quickly approaches.”