Make America Great. Well maybe not just yet!

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Make America Great. Well maybe not just yet!

The news cycle over the inauguration dominated any market news and for that matter markets were somewhat docile following Trump’s speech. Equities rallied although I think that’s simply a vain hope and bonds were once again weaker and look to move a little weaker over the next few weeks.

To date we have seen no policy statements from Trump. What we have seen from Trump is more trumpeting about fake news, and fake news on fake news statements. This sort of rhetoric won’t make America Great Again (a borrowed slogan from Reagan). What we also know is that Trump has already trademarked his next tagline for elections in four years’ time so Donald has been rather busy.

What America needs is not rhetoric but policy, real policy and a plan on how to increase productivity which has slipped significantly. Farming is one such area where due to cheap Mexican labour, innovation has remained somewhat backward compared to Australian farms. Innovation also means fewer jobs and this is something that Trump has either forgotten, neglected or put into the too hard basket. For example cherry grading can be either very laborious or can be done by machines. A grader can do 10 tonnes of cherries in a day and require less than four people. To do the equivalent amount in the same period requires some 450 persons! The price of the machine is about $A 3 mio. At $8 per hour that machine pays for itself in less than 100 days use of grading.  The point being that innovation costs jobs and that those jobs available require more skills.

What Trump and his subordinates have spent most of the weekend tweeting about is how unfair the Press have been and how they have faked the news and how awful Michelle Obama was during Trump’s inauguration. Then we had the criticism of the Demonstrators, the copying of Obama’s inauguration cake and how splendid and large the crowd was on Trump’s inauguration day. Frankly if that’s all that Trump’s Press corps and inner sanctum can come up with then America won’t become great again. What was not said was that the first part of Obama Care was repealed and a number of new laws were enacted without alerting the gathered Press. Also at stake was the visit by Trump to the CIA where Trump clearly stated that he had no beef with the Agency and that once again he was the victim of fake news.

What worries me is what happens when there is a negative employment number or a weak GDP number which the Administration disagrees with, will that be labelled Fake news?

For the moment there are a number of Trade Agreements up in the air. Australia and the TPP could well end up a victim. Europe has already signaled that the UK cannot sign any Agreements with the US until Brexit has occurred, in the meanwhile Australia is said to be in talks with the UK. (Up until 1964 Australia was the largest supplier of choice of Tasmanian Apples.) China has signaled a willingness to open up certain sectors within its economy to the US. Such things as insurance, banking, and finance are a possibility. However that comes with a hook and that hook is the recognition of the One China Policy and leave China alone in the South China Sea.

At the end of the day markets were looking for a direction or comments and will be quiet until the US open and look for guidance from the US markets reaction. My own view is that the market for a while will be quite positive until it appears as though nothing is being done. I don’t know what the catalyst will be but a change of view could be quite damaging. On another note and this also slid quietly through – was that the Debt Ceiling looks set to be now be boundless. With all the rhetoric from the Tea Party and republicans over debt it seems rather strange that now that they have power in all three positions that all of a sudden is not an issue and there is no reason to reign it in. Very curious.

Aussie Market Today.

Commodities were strong and that should help the Aussie market. The US equities staged a small rally and I expect that to continue into the ASX. Bonds were a little weaker and that weakness will prevail into the Aussie time zone. Credit was stronger and the Aussie Dollar for the moment is continuing its uptrend.

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