Losing the Midas touch?
Currently markets are still attempting to evaluate Trump’s bizarre press conference yesterday which was supposed to provide guidance on the fiscal policies to be employed. If anything markets appear toppish and really want some guidance on policy. The thesis is that markets need to see where the fiscal initiatives are being made and how those infrastructure projects will be financed.
Bonds rallied on the day and interestingly it appears as though a number of Market Economists don’t appear to have moved their inflation targets over the next few years which also then compromises growth forecasts. Growth or rather the levels of growth projected may never be achieved and markets are appearing to become rather sanguine on this point. Productivity growth is key to growth and this is missing in the dialogue. Also there is shift from investors looking purely to capital growth to companies that pay dividends and have buybacks. This is a complete change of behavior and companies have changed policies to meet this change in sentiment. This makes it difficult for companies then to increase capex to lift productivity. It’s a very circular argument.
In the meantime we saw yet another twitter rant from Trump on a company but this time is support of a donor. It appears as though one of the LL Bean family members donated to Trump and this has brought the ire of their consumer base. It appears as though the family member’s values are not aligned with the customers and there is a Twitter and Facebook announced boycott. LL Bean for those who don’t know is a Maine based outdoor gear retailer.
Governor Cuomo announced an interesting policy initiative today with the announcement that the Nuclear Power plants that due for replacement in NY State (especially Indian Point) will be replaced by wind generation. This initiative places Cuomo at direct odds with Trump as the wind turbines will be on Federal Land and are not to be seen from the Hudson River.
Energy continued its rally and the USD was weaker. Of concerns are Tillerson’s comments re China and access to its islands in the South China Sea. Also of concern is the likelihood of the Obama Care healthcare bill being repealed with no replacement putting 20 million folks at risk of not having healthcare. On another point Macey’s woes are continuing and may once again become a high yield bond, such is the disruption occurring in the US retail sector.
Aussie Market Today.
Bonds staged a nice rally today, and I expect this positive trend to find its way into the Aussie Market. Equities should be steady as energy continued its rally. Iron ore continued its uptrend and this bodes well for the Aussie Dollar, equities and especially the resource sector. Credit was steady on the day.