Blain's Morning Porridge - Is the Trump Jump over, and about to trigger a massive Trump Dump?
Blain’s Morning Porridge – March 21st 2017
“I felt a great disturbance in the Force…. I fear something terrible has happened.”
It’s the first day of Spring. Its bright and breezy out there… but we know some wicked weather this way comes. I can’t help but feel its much the same thing for markets.
There is a very intriguing Russian term: “Maskirovka”. It describes a strategy of misdirection: hiding the facts, confusing the enemy, pointing them towards the wrong conclusions, allowing the Reds to finally strike with surprise and brutal effect.
Maybe markets are playing a massive Maskirovka on us? After all, my primary Blain’s Market Mantra is: “The market has but one objective: to inflict the maximum amount of pain on the maximum amount of participants.”
I can’t help but wonder if the current strength of markets are founded on increasingly soft ground. In this febrile environment, politics have become the major influence upon sentiment…. From Trump to Brexit, across Scotland, Europe, France, Italy and the rest, its politics that have been are moving markets. Promises are raising expectations and the market is quite happy for participants to buy that story.
Step back and there is less sign fundamentals or facts are driving direction…. Should that worry us? Probably.
The rally in stocks has largely been driven by expectations of growth since the US election - the Trump Jump..
But are the risks of a Trump Dump rising?
The fact US growth has been revised back downwards in recent days might be a wake up to a new shifting political reality. I can’t help but think the sands are roiling beneath the White House faster than we think..
Since Trump’s election there has been a massive counter-spin to sell the “relax, we’ve got Trump in hand” story. We know the Republicans are absolutely focused on ensuring the success of the Trump administration – their future electability depends on it. The Republicans sell us a vision: don’t worry about the extraneous twittering and random paranoid assertions, the US is in safe hands. Yep, don’t worry.. the economy is going to grow. Tax reform and spending. The president and his cabinet are focused on the real issues. Don’t worry. Above all.. don’t worry. It will be fine..
Any married man knows the brutal truth: if the wife says “Its fine”, then it’s a terminal lose/lose situation. Three profoundly negative forces are converging on Trump:
First, there is the truth: Yesterday’s announcement by FBI Director James Comey confirming Obama hasn’t been wire-tapping Trump, the British haven’t been spying on Obama’s behalf, and that the investigation into links with the Russians over electoral interference will continue, solves nothing. It’s just going to trigger another twitter storm alleging fake news, demands to plug leaks, and more dislocation of the leadership. As we all know, Trump doesn’t know when to shut up and sit down.
Second, the man already looks beaten: Trump’s demeanor at recent events has been that of a spoiled toddler. The embarrassing photocall with Angela Merkel was a car-crash. He looks tired – the kiss of death for any political leader. He approval rating has been crashing in recent days – even among his core vote.
Third, the pressure is set to increase: a succession of skirmishes are coming up on the Supreme Court, Travel bans, trade and appointments. Trump can’t afford to waste the energy required to solve these and move his administration forward.
In short, in less than 100 days, Trump has cornered himself… and that makes me nervous the Trump Jump market basis could shortly morph into a massive dump.
And if we’ve got the Trump Jump wrong, how else have markets been fooling us? Since Brexit last year, we’ve gone from absolute horror at the UK cutting links with Europe to a blithe expectation the UK is set to thrive. What if we’re wrong and the Remoaners are right after all?
Markets are all about guessing what’s really happening and where it makes sense to invest. At the moment I think we’re swimming in a very muddy puddle.
Out of time.. Fastnet Race Charity: http://www.sail4cancer.org/fastnet-2017-bill-blain
Bill Blain