More comments from the White House on stock market moves
We’ve just had the second of two comments from the White House on the moves in stock markets today. A Trump aide has popped up to say;
- We are concerned about stock market setbacks
- US economic fundamentals remain strong
Trump has regularly Trumpeted from the roof tops that the stock market is into orbital territory because of his policies but it’s a double edged sword because when it does have a blip or a crash, it’s going to hurt, especially when we’ve seen a rally that hasn’t paused for breath for over a year. That’s just unnatural. What’s also unnatural is a country’s leader using the stock market as his own personal gauge of success. That’s just asking for a market spanking.
It’s still far too early to call a top but unless we see a futher dip to bring up something like a 15% drop from the top, we’re still well into bubble territory. Every good rally needs a refresh but the longer one goes wothout one, the harsher it will be when it does.
One thing Trump has got going his way, and that’s the higher stocks go, the more tax investors will be paying on their profits, which will offset some of the losses to the government coffers from lower tax rates. Maybe that’s behind the White House jawboning
For today, US stocks have managaed a spirited fightback from opening losses;
- S&P -0.40%
- Dow – 0.76%
- Nasdaq -0.35%
The BTFD’ers are out in force 😉
Philosophy: “Don’t be a Dick for a tick”
Read how Ryan got into trading here
- The last NFP competition of 2022 - December 1, 2022
- Will this month’s US NFP be a horror show? - October 4, 2022
- US NFP competition – Do you think there’s going to be a turn in the US jobs market? - August 31, 2022
This is where Trump and Mnuchin have highlighted their conundrum. Usually, a cheaper Dollar signals positive US stocks with multinationals selling goods overseas. Mnuchin declared at Davos that they wanted a cheaper USD. The US Treasury Dept protested as did the Fed, prompting Trump to say that they wanted a stronger USD. Mnuchin then qualified his remark saying and agreeing that in the long term a stronger USD was what they want. Trump has always said he wants a cheaper USD. “Period” as they say 😉 Problem now is that the Dollar is neither weak or strong. It`s middling post crisis lows to 2017 highs but currently with a weak bias high. A weak Dollar can also hit equities if accompanied by inflationary impact. What are investors wottied about right now? Higher wages weighing on corporate profits and the worry of a sudden rise in inflation. So to begin with, this pullback is mostly profit taking after a fantastic, complacency fuelled run up through record high after record highs. But then there is Trumps protectionism on trade. So far, China has ignored the Trump retaliations but IF Trump goes further (and he clearly wants to) and China does retaliate, that hits emerging markets. EMs hold enormous Dollar denominated debts, leaving Dollar weakness concentrated at uncomfortable levels against its major rivals = inflation (pass through) to the roof, yields up, borrowing costs up as yields go up. Is that what investors are beginning to get nervous about right now? DACA ends March 5th. Democrats insist on a deal, Trump insists no deal without the wall. The current funding ends 8th of this month. Fed meets 22nd March. Currently, its an 88% market probability for a March hike. After the jobs report, it should be higher and to all intents and purposes, nailed on mid-90% by now, but the permanent solution to avoid more government shutdowns is nowhere near. Fed cant hike during a shutdown and Democrats will make sure both coincide. Trump and Mnuchin have boxed themselves into a corner. See them wriggle out of it 😉
Great stuff Si. What I want to see is the wages in the next NFP. This one was quite a jump so I would want to see confirmation.