The “bond shock” story bubbles away in the background. And with the next 50-75bps rise in yields (due to perhaps expectations of trade wars or Chinese repatriation, or even further gains in inflation), the risk of a financial “event” is likely to jump. 2016 started with pessimism and ended with optimism; 2017 starts with optimism…
If there is any economic assumption that goes unquestioned, it's the notion that profits will remain robust for the foreseeable future. This assumption ignores the tidal forces that are now flowing against profits.
With all the partisan narrative defining Trump as a tariff-setting, anti-trade, economy-buster, we thought it ironic that free-trade-wunderkid Obama just escalated trade wars by bringing his administration's 16th trade-enforcement complaint against China with WTO, urging tariffs on subsidised Chinese aluminum, after accusing them of funneling artificially cheap loans from state-run banks to producers.
Are investors so focused on Dow 20,000 that they've become complacent about the true risks of Donald Trump's vows to tear up trade agreements, erect 17 commercial tariffs, and deport millions of immigrants?
“140 characters of unfiltered Trump is likely to create tensions .... Markets that are already shaken by the fallout from Brexit, the coming elections in Europe and indeed the increasing specter of cyber warfare could again see a safe-haven bid.”
"Markets don’t have a purpose any more - they just reflect whatever central planners want them to. Why wouldn’t it lead to the biggest collapse? My strategy doesn’t require that I’m right about the likelihood of that scenario. Logic dictates to me that it’s inevitable..."
The appointment of Peter Navarro to a formal White House post "shocked' Chinese officials who had hoped that Mr Trump would tone down his anti-Beijing rhetoric after assuming office. China will be even more shocked, however, if as CNN reports, Trump is about to implement a 10% import tariff, leading to an all out trade war with Beijing.
Ask yourself; what are the trades that make complete sense and all your instincts say are right, and then do the opposite. Basically what you end up constructing is an out of consensus portfolio and we all know how consensus trades work out in this market.
While being capable of imagining a 'black swan' event implies its non-existence; given the level of groupthink consensus agreement that the bond bull is dead, inflation is back, central banks are maxed out, and global fiscal stimulus will save the world, we thought a look at some of the more unsusual, unpredictable expectations for 2017 was worthwhile...
It took only nine days in office for President Obama to be nominated for the Nobel Peace Prize. Likewise, the markets seem to have prematurely greeted Trumponomics as an outstanding success. There’s just one thing: Trump hasn’t done anything yet. We’re still weeks away from his inauguration, and details of his economic plans remain scarce.
"There are strong grounds to fade this current rally... I believe that moving against the herd mentality, will likely bear fruit in what is probably going to be an even more intense roller coaster ride than what we witnessed in 2016." - David Rosenberg
Today's dramatic meltup in stocks has left many speechless, and just as many asking just how overvalued the market is at this moment. Here, for all those still interested in fundamentals, is the answer broken down in 20 different valuation metrics.