The 20th of Jan has been an important date for me for the past 3 years, well before the election of Trump was even a glimmer of parody in comedians' eyes, it has been a turning point for markets. This year it has been even more special. The plan has been that any trend developing over December would accelerate into the start of the year only to reverse about now. As the trend has been Trump, then the 20th would be seen as either a confirmation of the trend or a tear in the fabric of space/time Trumpinuum.
So what is it to be? I missed the live speech due to other commitments, instead relying on my trusty market-o-meter of news, which involves looking at where the markets are and working out what the news was. So first sighting of prices gave me the impression that I hadn’t missed much. Wall Street up a bit, Usd/Jpy flatish, bonds unexcited and everything a bit disappointingly dull. So, I assumed that speech fitted in with exactly what the market was expecting.
I have always believed that Trump’s plan was to get into power by taking the mickey out of the stalwarts of truth, honour, discretion and humility, getting the revs of the shock and awe machine up to 8000rpm, before taking office and dropping into 6th gear for a much more sedate and considered journey at a calm 1500rpm down the next 4 years.
But then I watched the speech and my narrative was hit by a shockwave. Here was the same Trump speaking as though he had just started out on the campaign trail. The repetitious rants about making America great again, the rampant protectionism, the rhetoric without substance and even the paradoxical statements such as “When you open your heart to patriotism, there is no room for prejudice” had me aghast. This was not a Presidential speech. It was one from a man who is confrontational (criticising all around him), stubborn, self-opinionated and lacking any 'how' to add to the ‘what’
How did this fit with the lack of action the markets? The obvious answer is that I was wrong in expecting the markets to expect a statesmanlike speech instead it being exactly what the markets were expecting. Which now has me wondering if the markets or I have the first premise wrong. Mine being that Trumponomics rested upon a steady Trump hand taking the tiller and guiding a changing ship in a different direction, whilst the markets believing that Trumponomics is coming whatever, whether it is as aboard a shiny new hi-tech vessel or a disintegrating hulk of a fireship. But, the way I see it, there is less chance of Trump succeeding in an agenda that will result in outcomes that the last month's market actions are forecasting.
Then came the protests - I have a very pragmatic view on protest marches. They only work if you have a 'plan B' and are a stepping stone to something else. Having neither and you end up much like the Occupy Wall Street event, an excess of self-expression and street theatre. Though I have read that OWS was a success because - "For many participants and observers, though, its more compelling achievement was to embody a minimally hierarchical communitarian polity that combined consensual direct democracy with a high degree of individual autonomy, and also a voluntary sharing economy with the market logics and state service provision that dominate everyday urban life” Err what? Obviously very clever stuff but, meanwhile, JPMorgan is doing just fine thank you.
So, lots of people protesting against Trump is great as long as it achieves their objective of getting rid of Trump or changing his behaviour. Having heard his speech and the attitude it reflects, I cannot see him changing his behaviour until his policies have proved so disastrous in their own right he blames others for their failures and effects changes under the flag of 'Saviour from other’s failures'. Which is actually how he got to where he is. If Trump is a protest against liberal elites then the protests are protests against protests. It's a shame that (to paraphrase an old saying) two protests don't make a right.
As for protest marches against Trump in other countries, they are going to have even less influence over Trump (read 'none') though are probably effective cathartic outpourings of mass grief at his victory, much as the Anti-Brexit marches were and likewise will have as little impact on financial markets - unless it turns towards civil war, which is so very unlikely.
The other main Trump news of the weekend was the ‘so how many were there’ debate. Unlike a ‘guess how many sweets are in the jar’ school fete competition that sees you winning the sweets, there seems to be little point in entering the competition. What is the upside? It really doesn’t matter how many people were at his inauguration as it won't change the outcome of him remaining President for four years. If it did then you might as well scrap elections and have voters turn up in Washington and stand on one side of the river for one candidate and the opposite side for the other, to chose the winner.
The point of the issue is just how much of an issue it has become and how it is being handled by either side. The key observation is that Trump is valuing image over substance again. He is willing to take on the Press over anything that doesn't portray him in a favourable light. He is even accused of halting the National Parks Service twitter feed in response to them tweeting ‘HowManyWereThereGate”. But as is possible in today's news games there is, of course, a chance there was another good reason for that action. A chance.
Boiling the last two days down, I have seen an increase, not a decrease, in the similarities between the way Trump is managing his new estate to a couple of other famous leaders around the world and though it is very early days and far too early to draw any conclusions, I am starting to compile a list of potential similarities that I am keeping an eye on
Running on a nationalist agenda.
Blaming overseas influences for the country's woes.
Blaming your own press for misreporting the truth.
Controlling social media output.
Manipulation of truth.
Showing more conciliatory tones towards Russia.
The belief that forces within your own secret service are working against you leading to you awrranging an organisational Putsch.
Ok, it’s not a very long list, but its a start. Of course, if he finds himself without enough power to execute his will then he could take the Turkish route and award himself some more
"Power corrupts, executive power executes" Polemic Paine 2017
Now whilst my quizzical concerns could easily be debunked, IF I were to do what news wires do with implied causality, (eg. My cat had green eyes. You have green eyes. My cat got run over. Woh, you'd better avoid roads or wear blue contact lenses) I could suggest the USD is going to go the way of the Turkish lira, but then I guess the US doesn't have a current account deficit that needs funding from foreign direct investment, a huge budget deficit and nor is it strapped with vast amounts of debt. (chortle).
But seriously, the theme is that Trump is good for the dollar, primarily because dollars will be repatriated home in a patriotic manner (happened with Turkish lira for a couple of weeks until exhausted and those who had, were soon 30% worse off) and that growth will outpace interest rates which will outpace inflation. And there you have the nub of it. Growth, inflation and interest rates. the balance between the three is critical. It is in any economy but in the new Trump world, it is critical because though there are some strong opinions as to which way they go (apparently all upwards) it will be the relationship between them all that is crucial and the margin for error in predicting the differential derivative is huge.
The expectation for economic wonderfulness has been rampant, you only have to look at sentiment charts since Trump was elected to realise that it’s all on hope rather than reality, because reality has not changed fast enough to justify these spikes in sentiment. Small businesses appear to be those who have invested most in the Trump dream.
Charts shamelessly nicked from my friends at Macro Man
Uni of Michigan Consumer Sentiment
Small business optimism
So there we have it. Trump's speech has not given me a feeling of calm control. His reaction towards the Press and CIA appears to be as confrontational as ever and this falls upon a country with very high expectations. The markets on Friday took the speech in their stride but plenty of them were looking at each other for solace, with the final pit-prop of belief being the sentiment readings creating a "wall of no worry".
I am still struggling to see how Trump can square handing power to the people whilst stifling the Press and delivering non-crony capitalism whilst imposing greater controls on the free market. If I am not a complete outlier in my interpretations, there should be a lot more doubt today than there was last week and with it a reversal in the sentiment of the Trump trade and, with that, a fall in equities and the dollar.
The carnage may start right here.