By Denny Gulino
THE WHITE HOUSE (MaceNews) – With China more resilient than depicted, Europe dithering as usual, President Trump having already flinched on trade, the impeachment inquiry reaching the public relations stage and, most important, global interest rates continuing to slowly lift off, why shouldn’t the S&P 500 be hovering around record levels?
The new “new normal” may not have topped all its walls of worry and everything from Brexit to the money markets’ liquidity frictions could take a turn for the worse, yet right now the tried and true approach of stumbling forward seems to be working really well.
Here at the White House there is a sense that, in the president’s view, the Lilliputions.are winning for now, vicious self important tiny beings tying him down, limiting his options, distracting the White House staff. There’s a lot more to the story to come, he hopes, and for the president, that means doubling down on the goal of reelection.
The Federal Reserve policy meeting Wednesday is about to cut rates one more time according to 97.3% of market participants’ fed fund futures bets, according to the CME’s FedWatch tool at midday. Given the Federal Open Market Committee’s historic reluctance to disappoint, a rate cut will not surprise.
Still President Trump, up to 14 tweets by early afternoon, did not let up his pressure for even deeper accommodation. “The Fed doesn’t have a clue!” he wrote. “We have unlimited potential, only held back by the Federal Reserve. But we are winning anyway!”
the Treasury 10-year at 1.838% may not seem all that impressive. After all, as recently as August it was above 2%. And back in the spring it was 2.5% and more. Counterparts in Germany and Japan still have negative yields, less negative but still negative.
Yet again, harking back to Mace News coverage of the IMF-World Bank meeting earlier in the month, the confidence of some central bank governors, like in Australia, and finance ministers, such as Germany’s, that negative rates are tapering off coupled with the IMF’s projection of somewhat stronger global growth next year, seemed to provide a foundation, somewhat fragile yet with an upward trajectory, for that new “new normal.”
Even if Wednesday’s first update of third-quarter GDP is at the low end of the forecast range, it will be a positive number by a good margin, a disappointment for the White House yet no catastrophe. Even if Friday’s jobs report is on the weak side, it won’t be a definitive inflection point with the now-settled GM strike affecting the numbers.
The Treasury refunding announcement that hits at the same time as GDP will likely contain no surprises, since last week’s final report on the fiscal year, with a $984 billion deficit, already resurrected all those forecasts of worse deficits to come throughout the next decade. Still, the Congressional Budget Office has projected that as a proportion of GDP, the deficit will not be getting worse in that decade, holding to no higher than the historically high range of 4.6% and likely a little less.
The biggest pivot point remains China and it is beginning to sink in that, in accepting a “phase one” deal far short of the comprehensive paradigm-shifting deal that had always been described as the goal, President Trump has blinked. While he might not cut or eliminate tariffs as China wants, he seemingly has signaled that all those ambitious goals, including less intellectual property appropriation, have to wait until the second term he hopes is still possible.
With Democrats in the House preparing to embark on public hearings, the news will not be improving on that front for the White House. The distractions will not diminish. A president under increased pressure may become even less presidential. So while it is possible peak China, peak Brexit and peak negative rates may be in sight if not already in the rear view mirror, the U.S. and the world have likely not yet seen peak “Trump.”
Other than an evening fund-raising appearance in Washington, the president has no major events on the day’s schedule. The event is being held at the Trump International Hotel and among the biggest Trump-related surprises of the past week has been the announcement the Trump sons are considering selling it.