Wednesday is usually when Donald Trump changes tack on at least one of his major policy promises, isn’t it?
But doesn’t he also tend to do that on Mondays, Thursdays, Sundays, Fridays, Tuesdays and Saturdays as well? You tell me! Yesterday it was the turn of the Chinese to be let off the hook as he has now suddenly decided that they, who were going to be branded as currency manipulators on his first day in office, 83 days ago, aren’t that bad at all. And did we not hear him declare that he is his own strategist, which looks like a very well targeted kick between the legs to Steve Bannon, who thought of himself to be occupying the role?
Equally, I am slightly intrigued by the way in which those who said he would moderate some of his opinions once he had arrived in the seat of power and with the nuclear keys in his pocket are now beating up on him for being inconsistent.
There is, however, a big problem that arises from the ongoing recalibration of the Trump presidency and that is what is going to happen to all the promises of massive infrastructure spending and the root-and-branch reform of Dodd-Frank. The Trump rally was built on the expectations for a massive boost to growth within the base of the domestic economy driven by US$2trn in infrastructure spending, helped along by a more liberal lending environment.
So far, 83 days into his term, all Trump has to show is a failed attempt to nix Obamacare, a bevy of close aids and confidantes falling like flies and more U-turns than an illiterate Uber driver trying to get to Wembley stadium.
CONFIDENCE TRICKS
Markets are as nervous as a herd of wildebeest sensing an approaching pride of lions. The VIX index rose further, closing up 0.70 at 15.77 which, to put it in context, has it 0.38 above its five-year average close and 2.68 above its 200-day moving average while the S&P 500 index itself is pretty much spot on the same 200-day measure. My fellow teenage scribbler, Billy Blain of Mint partners, recently commented that he felt there was one God-almighty blow-up brewing in both bond and stock markets, which I would instinctively agree with. However, just as economists have long stood accused of forecasting seven out of the last two recessions, so market polemicists like Billy and myself are equally good at seeing a collapse in market confidence around every corner.
I can only repeat my earlier observation that this is a short week with limited participation and curtailed liquidity and in thin markets the natural trend is to go “risk-off” rather than “risk-on”.
The up-coming French elections are still having markets wobble. Wolfgang Schäuble, the outspoken German finance minister, reflected the common view when he called a possible Le Pen/Melenchon second round run-off a “nightmare” and the “worst possible constellation”. He expressed the hope that Le Pen would not become French president while adding that Melenchon’s political ideas were “so horribly bad that this could not work”. France might not be the Netherlands but it might be worth remembering that when push came to shove the outcome of the elections there ended up nowhere near some of the worst fears expressed ahead of polling day. In the event, “le spread”, the 10-year Bund/OAT spread, tightened again yesterday and fell back to 72bp.
BALLS
Meanwhile I tripped over an interview with Andreas Dombret of the Bundesbank. We were peers at Bank of America and although I have clear memories of him, I’m not sure I rippled his pond. He was clearly more excited by our hires from Goldman Sachs, most of whom simply wrote themselves large cheques and then buggered off again after a couple of years without having achieved much but intent on cashing in elsewhere on their Goldman “old school tie” before it was too late. Feeling bitter and deceived isn’t going to do anything for my pension savings so let’s leave it at that.
Anyhow, Dombret very wisely commented that there is little sense in Europe trying to regulate on its own and not in coordination with the US authorities. I suppose he meant that if, as and when Trump the Disruptor and his merry men begin to take on Dodd-Frank, the EBA might have to review its own “balls-in-a-vice” approach to banking supervision. I have wondered in the past how a leaden-footed EU would cope with a more nimble US regulatory environment and now it is clear that I was not the only one. With MiFID II with its wolf’s lair-like construction hanging over us, this could all be rather interesting.
Not all the world is off tomorrow so the Yanks will be swamping us with a raft of PPI figures today and then with the CPI complex tomorrow. The key number will be tomorrow’s core CPI figure, which is forecast to come in at 2.3% year-on-year. Janet Yellen did say in her University of Michigan interview that although the economy was “coasting”, the Fed had no intention of falling behind the curve. The next FOMC meeting is May 3 and Fed funds are still in the 0.75%-1.00% target range. It might be time to start thinking and not to take anything for granted. And while on the subject of the University of Michigan, its sentiment index is also out today. The call is for 96.5, down from 96.9 and maybe the beginning of a falling trend.
Too much data and too few solid conclusions….isn’t that just the way it has now become?
Alas, it is that time of the week and the year again and all that remains is for me to wish you and yours a happy and peaceful Easter. So there we are; a four-day weekend ahead, today being a day on which a quiet week will become even quieter as ever more people take the Thursday off in order to avoid the traffic. It is a good day for the few left hanging on to clean up their inboxes and then go for a glass of wine with the City friends they have not seen at lunchtime since the run-up to Christmas and with whom they are no longer allowed to chat with over IB or Eikon. Cheers. Oh, and if the bosses get too serious, tell them to get real and to naff off. As usual, I am expecting to get a truckload of those invisible Easter eggs that have no calories and cost nothing. Well, I guess you can’t win ‘em all.