The Economy: The only data of note was that Existing Home Sales surprised to the downside. But all talk of the economy was framed by the new administration. True to his word Trump began working the day of his inauguration with an executive order that formally put Obama Care in the crosshairs. Monday there were executive orders withdrawing from TPP, renegotiating NAFTA, freezing Federal hiring except for the military and freezing all new and pending regulations. Tuesday were executive orders for the Keystone and Dakota Pipelines. Wednesday were executive orders for the wall and to bring “Sanctuary Cities” to heel. All of these are seminal events that will have enormous economic impact. Their final forms are unknown, but with the Republican legislature and SCOTUS appointments you can expect dramatic changes. The military is expecting a windfall; many non-profits are feeling the chill wind of fewer Federal grants.
Food for Thought: China appears to be the centerpiece of a new U.S. foreign policy that openly acknowledges the adversarial relationship between two super powers. Gone is the benign acceptance of Chinese activity in the hope that U.S. companies will benefit. There appears to be a muscular, new U.S. approach that puts American national self-interest first. Expect confrontations as the U.S. reasserts its military and economic hegemony in Asia. “… you don’t need a weatherman to know which way the wind blows.”
Music of the Week: US Military & Patriotic Favorites: “U.S. Navy Classics Vol.1”
The Economy: The U.S. economic numbers continue to indicate that things are picking up bigly. Housing starts are up. The Philly Fed Manufacturing Index is up. Jobless claims are near their lows. Earnings season is in full swing but the economic data this week is overshadowed by the inauguration. Davos, the annual financial confab was held this week. The group, which is noted for its strong support of globalization, is trying to adjust to the new reality in Washington. Team Trump was notably absent. The message is consistent whether it be to the Davos Elite, the State Department, the Intelligence Community, the Press or any of the other sacred cows of the past 100-years: “Your days of self-aggrandizement are over.”
Food for Thought: On the eve of the inauguration, it feels like Y2K on New Year’s Eve 1999. Even the weather is the same with drenching rains that flooded parties. Half the U.S. is apparently convinced that this is the second coming. Half that it’s Armageddon. It’ll be something in between. One thing is for sure, for the first time in decades, hard-nosed business men and women will be running the U.S. government with military men in charge at the Department of Defense. We expect change to come hard and fast.
Music of the Week: Sade “Promise”
The Economy: Much of what we’re hearing about the U.S. and global economy is positive. In addition, there is a growing sense of optimism led by the business sector which is ecstatic over the idea of tax cuts and less regulation. The ecstasy has yet to be tempered by the reality of the choices that will have to be made. The World Bank has pointed out that some of the benefits of tax cuts will be offset by rising protectionism. As a result, they’ve lowered their projections for global growth. However, financial markets remain upbeat and in rally mode. The animal spirits that have been unleashed since the election may become the self-fulfilling prophecy that ignites higher U.S. economic growth. A great deal depends on how much of the Trump agenda can be enacted and how quickly it can be done.
Food for Thought: There will be a flurry of Executive Orders on January 20th that will stop or unwind years of government and business activity. How that plays out is up to speculation. Follow-up legislation is also subject. Facing what may be the most dramatic change in decades; investors seem to be confident that this sea-change will occur quickly and painlessly. Obamacare will be replaced without any of the healthcare players suffering. Strategic realignment away from free trade, global warming and bilateral defense treaties will occur without impact on profits. Strict constructionism will take place without consequence. 80-years of immigration will be changed without economic effect. Mom used to tell us, “You can’t make an omelette without breaking eggs.” Review your exposure.