12 December 2016

MacroView | Trump Effect: Breaking The Curse, A New Paradigm

MacroView |  ©2016 DomainMondo.com
Domain Mondo's weekly review of  macro economic and investing news:
 
MacroView Feature • Trump Effect--Breaking the Curse, A New Paradigm--"the 'Curse of Correlation' has lifted, for now ..."--Convergex.com

The “Risk On, Risk Off” markets of 2010–2015, responded to macro news, everything depended on market perception of central bank interest rate policy. Since the election of Donald Trump, investors have been identifying new macro trends (e.g., higher interest rates) and unlock potential winners--financials, industrials, materials, healthcare--and sell losers (tech, utilities). Correlation data, post-election, indicates this time is different from any point since the Financial Crisis. Get Ready for Dow 20,000 | Barrons.com: "... the Dow is outpacing both the S&P 500 and the Nasdaq. It could continue to outperform in the year ahead ..."
Dow Jones Industrial Average (DJIA) UP 7.77% since Nov 8 (source: google.com)
Fed expected to raise rates

Video above published Dec 9, 2016, by FT.com: Sam Fleming talks to Donald Kohn and Joseph Gagnon about the prospect of higher interest rates and Donald Trump's proposed tax cuts. The Fed Open Market Committee (FOMC) meets December 13-14. 

Why the Fed will no longer be the big deal when it meets this week: The Federal Reserve Open Market Committee on Wednesday (Dec. 14) is expected to announce an interest rate hike — its second in a year, and also the second in 10 years. However, a 25 basis point increase in the Fed funds target rate has become anticlimactic because there's a new game in town for investors the Trump Effect:
"The surprise of the Republican sweep of Congress along with the Trump administration has really changed consensus expectations almost 180 degrees. We really are focusing in on some of the impacts that some of the policy changes could have. We may be shaking up the economic world in terms of what we've been waiting for, what the Fed has even been saying — we need Congress and fiscal policy to do some of the heavy lifting here. I guess in some cases the Fed isn't really leading the story as much as they had in the past, and in some ways the Fed is really following the market right now in terms of raising rates," said Scott Anderson, Chief Economist for Bank of the West.--CNBC.com
Why Trump's Fiscal Plans Won't Blow Up the Budget: Factor in the extent to which animal spirits will be unleashed--analysts cite a Trump proposal that could turbocharge corporate spending--Trump's business plan allows manufacturing companies to immediately expense their capital investments, while the deductibility of interest expenses on future loans would be eliminated, significantly increasing the net present value of a given investment project, and encouraging companies to ramp up spending.--Bloomberg.com.

China forex reserves drop $70bn

Video above published Dec 8, 2016, by FT.com: China’s foreign exchange reserves fell nearly $70bn last month as the country’s central bank burnt through more of its war chest in its battle to defend the renminbi from greater depreciation on the back of accelerating capital outflows.

•  Watch the yuan: The attitude of emerging-market policy makers to greater financial liberalization will be key in driving the next stage of global entanglement. China is, therefore, the elephant in the room. Beijing wishes to promote the global use of the yuan for trade and financial transactions, and permit two-way capital flows. But it faces a challenging balancing act, amid capital outflows and yuan-depreciation expectations. Outflows since the summer have ticked up since this year's low of $37.5 billion in February, rising to $69 billion in October, slightly up from $67 billion in September, according to Bloomberg Intelligence.--Bloomberg.com

•  Trump to name Exxon CEO Tillerson as Secretary of State: source | Reuters.com.

•  Tim Cook, Larry Page, Sheryl Sandberg ... are going to Trump’s tech summit next week | Recode.net: also attending Microsoft CEO Satya Nadella; Cisco CEO Chuck Robbins; IBM CEO Ginni Rometty; Intel CEO Brian Krzanich; Oracle CEO Safra Catz and even Jeff Bezos of Amazon.com Inc. The meeting will take place Wednesday (Dec. 14) in New York:
“I plan to tell the President-elect that we are with him and will help in any way we can. If he can reform the tax code, reduce regulation and negotiate better trade deals, the U.S. technology industry will be stronger and more competitive than ever.”--Safra Catz
•  Japan’s Pivot from Obama to Trump | NewYorker.com"Abe’s visit to Trump Tower in November went against the wishes of Obama’s White House, according to a Japanese media report, which cited an unnamed diplomatic source who said that it would be “unprecedented” because, “Mr. Trump is not yet the president.” But Richard Samuels, who heads the Center for International Studies at M.I.T., told me that Abe’s team “did what they had to do, quickly and well.” ... Ironically, Trump’s tough talk may help Abe achieve what Obama’s pivot never could: broad support from the Japanese public for revising Japan’s constitution." See also: Is Donald Trump already the President? | WashingtonExaminer.com: The era of Trump has already begun.

•  Democrats the "real threat" to the First Amendment: Time Warner CEO Jeff Bewkes told Business Insider's Henry Blodget that the "real threat" to the First Amendment did not come from President-elect Donald Trump during the campaign, but rather from the Democratic Party."--BusinessInsider.com.

•  One more thing: More #FakeNews from the WashingtonPost.com and NYTimes.com--see Anonymous Leaks to the WashPost About the CIA’s Russia Beliefs Are No Substitute for Evidence | TheIntercept.com by Glenn Greenwald; and also Kellyanne Conway calls [purported via anonymous sources] CIA report on Russian election meddling ‘laughable and ridiculous’ | WashingtonPost.com:
Unfortunately, as we found out on 9/11 and afterwards re: WMD in Iraq, the worst "intelligence" failures in U.S. history, "U.S. intelligence" claims or beliefs (particularly those of the Central Intelligence Agency a/k/a CIA) are often wrong and not credible. But at least the Russians are getting a good laugh out of all of this: Obama orders ‘full review’ of election hacks, results not to be made public | RT.com. See also: How To INSTANTLY Tell If Russia Hacked the Election | washingtonsblog.com.

-- John Poole, Editor, Domain Mondo


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