While it is not this week due to Monday turning into a non-deadline--might the endless game of delay in European and Euro-zone reform be encouraging the next Greek Debt and overall Euro-zone Crises? "Kick the can" has become normal operating procedure. Anyone who doubts that can just reference how many years (not just months or quarters) it has now been that ECB President Draghi has complained that the necessary ‘structural reform’ complement to ECB’s monetary stimulus has not been anywhere near as extensive as necessary to reinforce the ECB’s efforts.
That is the return of the Greek Debt Dilemma. Yep, it’s baaaaack! And the same sort of lack of consensus on the most critical steps to finally address it remain the same. After all of these years it would be reasonable to think the IMF and the EU powers-that-be might have resolved their differences on the need for more extensive Greek debt relief.
The recent antics of the Senate Democrats add to the previous anti-Trump actions that seemed rather pointless and might be more than a bit self-destructive. It is of course not just them. As noted in our Jan. 23, “Kool-Aid crisis” in America post, the degree of commitment to their own agenda and philosophy by each side of the U.S. political divide leaves it less than possible to achieve any real synergistic dialog and constructive result. Years have turned into over a decade of substandard leadership in the United States on the back of aggressive and highly divergent views of America’s role…and each side is dead sure it’s right and the other side has nothing to offer.
Anyone who needs us to inform them there is an acrimonious partisan divide in America that has reached crisis proportions has likely been in a coma. And when we say America, we actually mean all of the developed economies. They have all succumbed to the siren call of the highly partisan political divide that has polarized a significant portion of their populations.
The impressive Trump-o-phoria U.S. equities rally has stalled since mid-December. Even the strongest of markets tend to get tired after extended divergence above the longer term underlying trend momentum. And this was no different for one very good additional reason: all the inferences of more amenable economic and business policies were derived from Trump’s broad pronouncements during the election campaign.
While a week ago Fed Chair Yellen and her cohorts put a nominally stronger spin into the FOMC statement and projections as well as her press conference discussion of the degree to which the U.S. economy is firming a bit further, our sense is that underneath the surface they are dreading the need to revert back to a much more aggressive view of the upside U.S. economic potential. That is in part because they were so wrong in projecting all of the higher inflation and need for higher rates almost exactly one year ago.
In the context of how aggressively trends across all asset classes have progressed since Donald Trump’s U.S. Presidential election victory, it might seem like needless hindsight to revert back to a political assessment. Yet, there are so many interesting aspects of the U.S. election campaign and major developments in Europe as well that this is actually worth an extensive review. We begin with one of the more interesting post mortems on the Hillary Clinton loss.
This year is a bit different in the context of a very upbeat outlook on the pending regime change in Washington D.C. Yet we still believe that our long-standing views on the "Santa" influence in the markets remains the same. And the U.S. election certainly provides a plethora of blessings for the equities markets from multiple benefactors this year.
Even we were a bit shocked that “The Donald” and his team actually pulled it off. Yet, it is a measure of just how much disenfranchised older white workers and even a select subset of younger voters were fed up with the "business as usual" inside-dealing and advantage to the largest and richest, which the Washington DC establishment has supported over the past 16 years.
First things first. As we head into the final leg of the 2016 U.S. general election that has seen vitriol and tangential issues (personality and peccadillos) elevated to what were previously unimaginable levels, we repeat our previous admonition: THERE IS ABSOLUTELY NO INCENTIVE TO HOLD ANY INTERMEDIATE-TERM MARKET POSITIONS INTO THE U.S. ELECTION THIS TUESDAY.