Why For Traders, "It's Still All About Trump"

Tyler Durden's picture

By Mark Cudmore is a former FX trader who writes for Bloomberg

It's Still All About Trump

A visa decision affecting seven very small economies does not seem like a markets story but there are clear trading implications in this case. The first is that, no matter how much investors might wish otherwise, markets are still inextricably linked to the new U.S. president.

The Trump trades – long dollar and U.S. equities, short Treasuries -- received a boost Thursday as the president promised a “phenomenal” tax plan within weeks.

Not long after, Trump suffered a major setback in the appeals court on his immigration ban. The markets have ignored this decision for now, but they should reconsider.

The limitations on Trump’s ability to bully the system are being emphasized. This will embolden members of Congress to stand up to him if they don’t support his tax plan. And there appears to be many who don’t – even from his own party.

That puts further doubt on an already vague promise. No sign of details and no guidance on the timeline for implementation.

Trump’s immediate reaction to the legal decision -- “See you in court” – shows he is determined to fight this all the way up to the Supreme Court. This may distract him from the domestic economy.

The more positive spin is that he will now be even more motivated to deliver a larger success quickly on tax (or infrastructure) to compensate for his failure on immigration.

Another plus for markets: he’s walked back his rhetoric on the issue of Taiwan, making nice and endorsing the “One China” policy in his chat with Chinese President Xi. The backdown shows — perhaps — a greater grasp of international reality creeping into his game. It also goes some way to soothing concerns about an imminent trade war, on that issue anyway.

In the interim, Trump’s meeting with Abe will overshadow the short-term fate of the dollar, and versus the yen in particular. Abe is bringing a load of investment promises which Trump is sure to promote heavily. If he does, without mentioning currency manipulation, then USD/JPY can have a decent spike higher.

The point is, much as we might like to focus on other inputs, Trump is still deciding the direction for many key assets. Investors shouldn’t underestimate this effect – even from tangential topics like visa policy.

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yogibear's picture

Trump is just an excuse for Wall Street. They intend on taking the indexes up no matter what.

 

BigFatUglyBubble's picture

It's the inverted-limbo National Championships.  How high can you go?

thesonandheir's picture

In the intent of crashing them on his watch.

Dilluminati's picture

Because while few will admit it they know that Globalism was a failure and did nothing but exasberate wealth inequalty, legalize monopoly markets, and create mal-investment.

Simple..

because globalism failed in Greece and Germany

Simple.

Because Merkel simply cannot export/deport enough illegals to get re-elected 

Finally: because reality matters and not animal spirits

 

BigFatUglyBubble's picture

Reality hasn't seemed to matter much for several months.  It's going to creep back in a little bit everyday though.  Credit tightening now.  China raising rates.  Hello Reality, I missed you old chap.

NoPension's picture

Neither one of the lower courts ( inferior to the Supreme Court) have Original Standing under Article 3. If the case is between a State and the Federal government, the constitution says it CANNOT be heard by a lower court.

Why am I wrong?

Why give them power they don't have?

A82EBA's picture

back of the envelope $20/week into sp500 since 2008 is $10,000 today

dude duderson's picture

So, will he be distracted from working on domestic issues or be motivated to deliver on domestic infastructure and tax plan? You can't have both.

And it's not a "plus" for the markets that he's walking back the China rhetoric.  Back peddling means he doesn't hold his ground, which will also be true on this supposedly amazing tax plan and all the other nonsense promises that most certainly will not happen.

So, the markets can't have their cake and eat it too, that is unless the recent rise has absolutley nothing to do with Trump.

How convenient that Dodd Frank is being taken apart too.  This is a setup if I've ever seen one.  We've been played.

kensdad's picture

Why would Trump back down and fold his tent on the "One China" policy? It goes against his credo of bravado, and makes his hands look small. Maybe the Chinese have a dossier on Trump like the Russians? Everyone knows that Trump's entire adult life is filled with stuff that he can be blackmailed with...