Sunday, January 29, 2017

Trump and The Fed Just Imploded The Economy

The reflation trade is set to unwind violently amid record insider selling and record short bond positioning. Fiscal stimulus takes months to pass and months more to bring economic impact. In the meantime, the negative monetary effects of Trump-o-Nomics are already taking effect...

Reuters Jan. 28, 2017
Trouble in Paradise...
"When it comes to tax reform, senior congressional aides said the spring of 2018 might be a more likely time than this year for the passage of legislation."

The Fed started talking up interest rates again post-Brexit (July), which drove short-term yields higher. Then Trump piled on with his undefined "fiscal stimulus" plan in November which drove long-term rates higher. These two actions raised rates along the ENTIRE curve, which is extremely deflationary.  Combined they rallied the dollar which feeds through via higher imports, lower exports, and lower corporate profits. Which is why GDP missed on Friday. 

"Good job, everybody. Go buy some stocks now"

Russell / Dow ratio with consumer staples: