No Christmas gifts for Président Donald
Explaining why Janet is very political explains that we will have a Trump’s Fed.
In September 2016, Janet though that the situation was not proper for a rate hike, Hillary Clinton was ridding high. Now in December, as President elect Trump is nominating his cabinet, it is urgent to hike them, so be it. But the surprise was not there, the American economy is now so strong that she talked of three hike in 2017. The American people didn’t noticed it but the long awaited boom has finally arrived, since September Goldilocks camed back.
It’s a joke, the ending of the Obama’s presidency would have been a good time to let rates go higher, prompting a long awaited purge in the bond market; it would have been good for the USA and for the world. But Democrats were desperate to keep the power, there would be no end of mandate crash as there was in 2000 and 2008, Hillary Clinton was to be the new president…Pennsylvania, Michigan and Wisconsin decided otherwise, wisely I think.
But now President Donald have a problem on his tiny hands ! If he doesn’t want to destroy his presidency, he can’t let a bond bloodbath occur now, he would own it. Further more, with Janet hawkishness, the dollar is going stellar which is a less than ideal spot for a man which want to bring back jobs. All that means that his administration will have to ensure the Fed is obedient and remain the good dove it was during the whole Obama’s presidency. That fight will begin on day one, don’t forget to follow Donald on twitter…more fun is on our way !
Dollar bloodbath and inflation, at last !
All that means that we will see a fight for the Fed which will be followed be a very lenient new policy. The bond market will not collapse as it is doing since the Brexit but the dollar will go down from his current high mark. Otherwise, a Trump’s presidency will not be able to have any significant impact.
From our perspective, Donald Trump is very unlikely to not act and launch an all out offensive to make the Fed giving up it’s current policy. A weak dollar is still the best way to take protectionist steps. As oil is following an international price, it will give a big boost to producers in the USA : they need that, Rex Tillerson could tell you that. So all in all, we think that the markets are going to be surprised in 2017, rates will not go higher and higher and sometimes in September next year, we will have a Fed member telling us that the economy is not that stellar, to say the least. It will high time, a new very expansionary budget will be on his way !
On the long run all that means that the USA economy let a golden occasion to make things right in September, the political opportunity is now over. It’s only logical to assume that the USA and Europe are going to glide further on the Japanese road of no interests for at least four more years. It should be understood that we’ve been there for a long time now and four more years…is a long time. Our broken system is very tired and it could burst any day, no one knows, but here we make the bet that President Donald will not dare the beast …Maverick perhaps, mad no !