Let’s get one thing straight: Donald John Trump was not elected to the White House simply by a bunch of racist, illiterate, out-of-work has-beens wrapped in the Stars and Stripes.
That was no more the case than the Brexit referendum having been supported exclusively by a bunch of racist, illiterate out-of-work has-beens, wrapped in the Union flag. But I suspect that many Trump voters will have been speechless when listening to the inauguration address by the 45th president and even more perplexed to hear that the new leader of the Union and the free world has nothing better to do than to take on the press over reports as to how many people actually stood lining the streets of Washington to watch the ceremony.
From this punch-up on Twitter followed the first official appearance by Sean Spicer, the new White House press secretary, aimed at spreading what has already been dubbed by the new administration “the alternative truth”. The presidency isn’t a ratings game but based on the way events have unfolded since Friday morning, pretty much anything and everything we knew about the way the US is led has lost validity. Trump may be in the process of draining the swamp but he must either replace it with a vacuum or with something different and I’m not sure that that something is going to be to everybody’s liking, including many of those who voted for him.
Don’t mention the war!
I read a line last week with respect to the British foreign secretary, Boris Johnson, having warned Francois Hollande not to think of meting out a punishment beating to the UK in the style of World War II. The screams of protest that rose were deafening. The line I read suggested that whoever mentions the war has already lost the argument. In the same way, whoever might be bold enough to compare some of Trump’s rants to those of one or two those unmentionable European leaders of the 1930s probably does too. I shall say no more other than that puts me firmly in the camp of guaranteed losers.
The greatest fear is that President Trump will do one thing that has never been done before and that is to try to implement all of his campaign promises without hesitation of deviation, and that if anything he proposes finds itself mired in Congress, he will declare on Twitter that the will of the people is being stymied by a corrupt and self-seeking Capitol Hill.
That said, and looking at the possible positives, this could be the time when the collective of elected representatives of the people – the president isn’t the only one around who can claim to have a popular mandate – rises from years of petty partisan sniping and backbiting and relearns how to take control of and exercise real and responsible government. The process, should it happen, will be tantamount to a revolution, a coup d’état, and markets, which hate uncertainty, will be hard pressed to know what to do next.
What is it good for?
One thing that Trump has got right is that the national infrastructure is creaking at the joints, gradually falling to bits and that one of the major causes of the shortage of cash has been the engagement of the US in wars all over the globe. His assertion that the US intervention in Iraq is the greatest tragedy to have befallen the country – Vietnam included – in its entire history is not entirely without merit. Vietnam cost more lives – on both sides – but it did not terminally undermine America’s role as moral focal point for the industrialised West. Trump’s answer is simple: If you don’t want us to be the leader then we won’t be the leader; go find a better one – you’re on yer own, buster.
And it is into this pond of uncertainty that we travel every morning to do our job by creating value for our clients, selling them that value at a fair price for both them and us and returning the proceeds to our shareholders who, if they are happy, will reward us handsomely. It sounds easy but it has probably, in the course of the 30-odd years I’ve been hanging around the street corners of the City and of Wall Street, never been harder.
Strategists project what might lie ahead, employ their experience to narrow down the range of possibilities into a portfolio of probabilities and then attempt to propose a course of action that maximises the upside while minimising the downside that might result from the range of possible outcomes.
The Darkness
Fact is, although I’m sure that Sean Spicer will already have alternative facts to hand, that we are all now trading in the dark. We would like to think that things will be easy and that a sharp reduction in corporation tax will revitalise the US economy and push it to the 3%-4% growth environment but if we look at what growth in outstanding debt, both public and domestic, was needed to achieve such levels of economic expansion in the past and if we look at what levels of debt levels we are already carrying, we must question whether 4% really is that desirable.
I repeat my call to all those clever Nobel Prize laureates, as well as to those aspiring to join the ranks, to find a way of not simply measuring the output of an economy but the value created within it. In the end, it’s like football – never mind how many passes were made, how many tackles applied or how many shots were had on goal; it’s about who scored more goals than the opposition – that’s the value added, over and out.
I was happy to see my old chum Carl Weinberg of High Frequency Economics on CNBC this morning agreeing with my general opinion that the Fed will stretch to “at least three moves this year”. I stick with my forecast of four moves higher, assuming 25bp per move. Maybe we should become really bold and start to trade not the number of tightening moves but the rate we expect to see Fed Funds at by year end. Let’s face it, there exists no known law that binds the FOMC to 25bp increments. The rhetoric is clearly waxing more hawkish, including that of the arch-dove incarnate Janet Yellen.
Meanwhile Europe drags on and, as Weinberg observed, the political risks here are as high, if not higher, than in the US. The French Socialists held the first round of their own primary over the weekend and next to nobody showed up. The left-wing Benoit Hamon beat former prime minister Manuel Valls into second place but, in the greater scheme of the outcome of the May poll, who cares? All the while, the European populist right was holding a cross-border conference in Koblenz, although I got the impression that those leaders are also beginning to sound rather hollow – and hollow drums supposedly make the loudest noise.
Finally, and at the end of what has been a rather political weekend, I was wondering, in the aftermath of the mainstream calling for populism to be countered, can anybody tell me what the correct antonym might be?
Volatility and unpredictability are sure to remain in control. The dollar will continue to be the catalyst and it will be going up and down… though not necessarily always in that order.
Have a good week.