Weekend Reading: End Of Trumpflation?

Tyler Durden's picture

Authored by Lance Roberts via RealInvestmentAdvice.com,

Interesting….

For the last few months, there have been ongoing issues surrounding the “Russia Connection” and the underlying, and ongoing, investigations into the potential involvement/interference into the Presidential elections.

The market hasn’t cared.  Until Wednesday.

As I noted last Friday:

“This…has…to…be…the…most…boring…market…ever.”

As suspected, it did end with a bang on Wednesday as markets dropped sharply on the news of a “leaked” memo to the New York Times. James Comey, former head of the FBI, will now be questioned by Congress next week and asked to provide that memo, but in the mean time the Justice Department has now appointed a special prosecutor to investigate the “Russia Connection.” 

While the Washington intrigue is certainly interesting, the question is “why after all these months did it matter to the markets now?” 

The answer is simple. It potentially stalls all the legislative actions the markets have been banking on for the “Trumpflation” trade from tax cuts to infrastructure spending. A look at the bond market gives you a clearer picture of the “fading” hopes on an inflation-driven economic boom.

Importantly, as shown in the chart of the S&P 500 above, the markets broke below the 50-dma on Wednesday and triggered a short-term “sell signal” as shown in the lower part of the chart. Importantly, these signals when previously triggered have denoted periods of increased volatility and corrective actions until they are complete. Despite the rally on Thursday, I suspect the “shot across the bow” on Wednesday was just that, a warning shot to investors which suggest reflexive rallies should be used to rebalance and de-risk portfolios for now. 

We need to see what happens over the next week to see if the markets can regain their footing. However, for now, holding a little dry powder continues to make some sense.

In the meantime, here is what I am reading this weekend.


Politics/Fed/Economy


Markets


Research / Interesting Reads


“The Market Will Always Tell You When You Are Wrong.” – Jesse Livermore

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Soul Glow's picture

"Goldman Sachs executive Jim Donovan, who was nominated by President Trump in March to serve as deputy Treasury secretary, unexpectedly announced he would be removing himself from consideration."  

Not even the Goldman guys are sticking around for this one now.

BigFatUglyBubble's picture

'member this doofus?

Mishkin was confirmed as a member of the Board of Governors of the Federal Reserve on September 5, 2006 to fill an unexpired term ending January 31, 2014.[3] On May 28, 2008, in the middle of the financial collapse, he submitted his resignation from the Board of Governors, effective August 31, 2008, in order to revise his textbook and resume his teaching duties at Columbia Business School.[9]

 

DavidC's picture

Ah yes, the same Mishkin who had the 'typo' in his resume that had changed the name of his paper 'Financial Stability in Iceland' to 'Financial Instability in Iceland'.

PoS.

DavidC

Clowns on Acid's picture

Exactly right. Markets will be "allowed" to "retrace" until Trump resigns. GS is short now most probably. You know that McCain and Graham and the rest of RINOs are. Rebound when Trump resigns is the plan.

Anyone who publicly supported Trump is being forced out in Media and politics. The Bolsheviks are going full court press. Mueller will be key.

Jim DeMint of Heritage Foundation

Roger Ailes

Bill O'Reilly

Bill Shine

Sean Hannity (soon)

Jesse Waters (soon)

MIchael Flynn

Manafort

Jared (next)