It is not just U.S. President Donald Trump who is being held to the standard that was set by the aggressive actions of President Franklin Delano Roosevelt during the opening phase of his first term in 1933. As has been true for every President since Roosevelt who has been measured by that standard (which did not exist until the first Roosevelt administration), it is a significantly unfair comparison by any measure.
Since Wednesday morning’s very much stronger than expected U.S. ADP February Employment report there has been a battle in the U.S. equities between that and some key less than bullish factors. Even prior to that release there was Tuesday morning’s Organization for Economic Cooperation and Development major semiannual Interim Economic Outlook. It seemed less upbeat than their recent monthly Composite Leading Indicators might have suggested.
It might seem a bit redundant to revisit European partisan Kool-Aid consumption after our posts of the past two weeks. Yet, there is another development outside of the previously explored persistent weakness of the Greek economy and seemingly intractable nature of its debt dilemma: the process and proposed solution to rescue Italian banks. And the weakest is the poster child for the problems not only to date, yet also how the proposed "solution" might backfire.
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.