The media is awash today with their take for reasoning on the latest political fallout currently taking place for the supposed “deal” the President made with the Democrat party in reference to hurricane Harvey relief funds for Texas, while also pushing any debt discussion off until December, squashing fears of a government shutdown and more, for the time being.
Some are breathing a sigh of relief, others, from the political optics side, are furious because it seems their “team” was dissed. Then there are others wondering, weighing the intrigue and political maneuvering of what may or may not be at hand as to wonder would Machiavelli laugh, cry, or both. There isn’t enough digital ink to cover all the possible scenarios. Yet, that hasn’t, nor will it, stop most of the hot-air via the media in all its forms to parse what they believe is at hand.
For what it’s worth, here’s what I see, as well as predict, just might be the fallout from the above. I don’t know if I’m right, or will even be close. But as Bob Dylan wrote and sang those many moons ago: “You don’t need a weatherman to know which way the wind blows.” So in that light, here’s what I see…
All of the above is immaterial to anything in regards to the economy except for one thing, and one thing only, which is this:
As of today, my prediction that not only was the Trump agenda on the fast-track to becoming not just DOA, but dead and buried, is now pretty much fulfilled.
There will be (the de facto proof is the deal itself) nothing passed legislatively that the entire “Trump trade of hopium” was based on for the foreseeable future into at least next year.
2017 was supposed to have been (remember the 100 day promises from everyone?) the, as in The Year to pass meaningful parts of the Trump agenda through the congress and signed into law under the auspices of “No excuses.”
The result has been nothing more than excuse, after excuse to pass nothing.
I know many business leaders of both big, as well as small, that are mortified at this latest outcome. And it has nothing to do with a “Left-Right” argument.
It had everything to do with what they honestly believed (and were positioning for) that forthcoming was relief in the form of healthcare, taxes, and regulatory reform. And, it would be either passed into law, or working its way through final drafts ready to be voted then signed into it.
They now have concluded – it’s over. And waiting for another “maybe we’ll get X,Y, or Z” next year, when it was promised to be a “slam-dunk” this year, has left many of them actually bewildered. At least those that I’ve spoken with today. All I can say is this – I’d wager dollars-to-doughnuts their feelings represent most.
I believe this will also have the very same effect on the many who also had “faith” in the Trump agenda sailing through represented by the exuberance in the “markets” since the election.
I am of the opinion as business leaders begin to pull in their horns, so too will many of the current “hopium” trade-weighted bulls. And the “markets” are about to come under some pressure relatively soon. And by soon I mean: real soon. Here’s why…
As I’ve stated ad nauseam, once it has to be accepted by the “market” that the Trump agenda is now dead and buried. Not only would it have to deal with that premise, but (and it’s a very, very big but) it would also have to deal with the consequences of what the Fed. has already wrought with its prior raising of rates into further deteriorating data.
To be clear, I am of the opinion the “markets” will now take on a “holding pattern” type effect (aka boring) until the Fed. reconvenes for its next meeting in 8 trading days. (e.g., Sept. 19 – 20)
Whether or not the Fed. raises or not, discusses future time frames, or simply implements immediately balance sheet reduction is all secondary as to what happens next in the “markets.” In other words, what I’m saying is this: The mold is already cast. Just how fast it develops and sets is the only question. i.e., Is it a rational, controlled type sell-off adjusting to the new paradigm? Or – Is it all about to be thrown into an empty elevator shaft?
My guess is if the Fed. does nothing and “stays the course” there’s a chance at a controlled type of “hopium” release from the current bubble. If the Fed. decides it wants to “stick-a-fork-in-it” via way of raising rates, and balance sheet implementation? Then I believe it’s the latter of the two that’s in the cards.
We’re going to know soon enough, and watching the “markets” for clues for just how nervous, or panicked it might be, or become, is of the utmost importance in my view.
As I’ve stated many times, “There comes a time when safety, above all else, is paramount.” What “safety” may mean to you is for you to decide. But I believe we are at one of those times where one must not only pay attention, but rather, almost to a fault, is now here in regards to these “markets.”
Whether or not anything comes of it? Who knows. But regardless, I believe we are at one of those critical junctures that are different from most others where, much like an actual bull stampede, all it takes in one small incident to send the entire herd storming. The real problem begins when, or if, they decide to run, if it’s in the direction of cliffs. Again, for I can’t make this point more strongly: I feel we are at one of those moments.
If it all passes, and nothing happens except for political “sunshine, lollipops, and rainbows?” So be it. However, to put my own spin on that other maxim – you are far better to be prepared 2 weeks early – than 2 seconds late.
As always, we shall see. But that doesn’t mean we should avert our eyes from watching the horizon for further clues. It’s that important.
© 2017 Mark St.Cyr