The Economy: The numbers were again mixed and eclipsed this week by politics. Housing starts and building permits were down. Jobless claims up, Industrial Production down. Fed minutes were, as usual, a sleeper … watching Yellen kick the can down the road is tedious at best. The excitement was reserved for the NOKO Doughboy, who blinked; for the rewriting of U.S. history that occurred in North Carolina and for the continuing Circus on the Potomac. With the exit of Steve Bannon from the White House, Chief of Staff John Kelly appears to have consolidated his control. If true, we may begin to see a unified message from the Trump Administration. Even if that message is via tweet, it may be an improvement over the noise that has become a distraction. With the uncertainty of the past few weeks, stocks have weakened while bonds have been in a holding pattern.
Food for Thought: Stocks are making some investors nervous. After relentlessly moving up this year, markets have stalled. Is it because August is usually a weak month, or is something else at play? U.S. markets have failed to hold their highs and the FANGs are down about 10%. Bulls see Dow 30,000 around the corner. Bears are salivating for a 20% correction. Central Banks continue to pump trillions into the global economy. As long as Fed Policy is “Free Money Forever” there will be an upward bias to stocks. Yet warnings abound. Fiscal policy along with Trump Initiatives are DOA. Political gridlock under Obama was astonishing; under The Donald it is simply unbelievable. Clearly stocks can’t go up forever. This begs the question for investors who are on the sidelines or short, “Do you want to be right or do you want to make money?” Which of course leads to the caveat, “Markets can remain irrational longer than you can remain solvent.”
Music of the Week: Shakira’s “Can’t Remember to Forget You”
The Economy: Caution over mixed economic numbers continued this week with Housing Starts unexpectedly weak and Industrial Production unexpectedly strong. Looking ahead, one has to ask if U.S. political turmoil will be reflected in the economy. Today, Texas Representative Al Green, speaking from the floor of The House, called for Trump’s impeachment. So it’s official; the knife fight is on. Consequences be damned. Ideology Rules Supreme. The drama weighed on stock markets as a minor pull-back took hold. Indices were down 1 1/2 to 3% on the day. The VIX (S&P500 Fear Index) was up 46%. But this is not a Black Swan; nothing unexpected here. If the past 8-years are any indication, We can expect today’s losses to be erased before the week is out. Failing Buy-The-Dip, we can expect the Fed to announce another round of stimulus programs to save stock markets. If not a stimulus fix like a QE-4, perhaps a suspension of any further interest rate increases for 2017. After all, Nixon’s Watergate only shaved 45% from stock market valuations. So the Fed has its work cut out for it.
Food for Thought: “If The Glove don’t fit, Impeach!”
Music of the Week: Frank Black’s “Frank Black”
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”