Blain's Morning Porridge - Forget Trump, its Rates to worry about!
Mint – Blain’s Morning Porridge – March 1st 2017 “St David’s Day”
“When one burns one’s bridges, what a very nice fire it makes…”
The mainstream press is raving about how “Presidential” Donald Trump looked last night. The financial news is analysing Fed members saying this month’s Fed meeting is now very “live” for a rate hike.
As market players: what should we be thinking?
First up is get over the political gibberish.
I read a piece from El-Erian on BBerg this morning saying the market needs more detail on the tax cuts, reform and deregulation – but he’s missing the point.
The market’s over-reaction to Trump events and tweets is waning. It’s time to stop focusing on the noise and look to the reality. Sitting behind Trump last night was a very happy looking, dare I say contented, Paul Ryan – speaker of the House. I suspect he will be the likely “Real Republican” contender in 2000 when Trump loses interest. While Ryan wasn’t Gepeto, the puppet maker, you have to think/hope the strings are looking more secure.
How certain can we be Ryan and his ilk actually have Trump under control?
They have shared goals. So while Trump was light on spending plans and tac corrections, and dwelt on his pet irrelevancies of immigration and populist verbiage, the Republican’s know all they have to do is ensure he delivers - and they sound willing to support the necessary spending. Then they can reap the upside from US growth, and take the electoral credit from those who felt disenfranchised during the previous Liberal-era.
The Republicans would be supping with the devil if Trump (and Bannon) were at the forefront of some organised intellectually-based plot to turn the USA into some right-wing dictatorship.. but whatever Bannon hopes for, Trump will likely prove a one-off. His victory neutered the right-wing loonies like the Tea-Party. Thankfully we haven’t heard Sarah Palin mentioned for months.
Trump won because he called timing on the crisis and disillusionment with failed liberal-politics perfectly. A failure to deliver capped by the inevitable destructive mistake of putting Clinton against him. One-off. Won’t happen again.
It was a reset button pressed on US politics. The Republican’s look the winners because they look relevant again, have the opportunity to reconnect with voters, and they have a plan…. kickstart the US economy. Trump came out of the blue – but he’s been made part of the strategy.
The Democrats sat like they were sucking lemons last night, wondering when their cheese was stolen! The risk is the Republican’s don’t deliver Trump’s promises on Taxes and deregulation – that might get interesting as the sheer scale of the proposed spending becomes apparent, and there is a risk of a resurgent right-wing witch hunt across US politics destroying the current Republican consensus.. These are about the only hopes the Democrats have left..
Second up is the bond market if and when the Fed hikes…
Now that is going to get interesting… We aren’t talking about a sudden back up in rates to 4-5%.. A modest rise at most. Demand for dollars and Treasuries will be thing to watch – and keep an eye on the 10-year rather than the short-rates everyone is taking about. We’ve been in a new 2.5% range that’s pretty much priced in some form of recovery. Nothing set to change – and even if the national debt rises a couple of trillion… let’s not panic in an hasty way.. growth and inflation…
The issue might become Trump vs Fed – is it something we should worry about? Clearly.. but… not today…
I’ve just spent a great long weekend on the slopes, and the only fly in the ointment was the airline who ripped us off and screwed up the flight out. Revenge will be taken. I’m pretty pleased that after heart surgery 4 months ago, I’ve managed over 250km on piste and nearly twice the height of Everest in vertical decent. OK – I’ve been skiing slowly (max-speed according to Ski-track of 65kmph) but it’s been great fun. Much of that is due to the excellent care I received from health service professionals – and that’s why I’m supporting Wessex Heartbeat as one of my co-beneficiary charities this year when I do the Fastnet Race. See: http://www.sail4cancer.org/fastnet-2017-bill-blain
Out of time..
Bill Blain