2017/02/02 Quick Take: Fed and Flynn
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Quick Take: Thursday, February 2, 2017
Fed and Flynn
The Federal Open Market Committee statement (our mildly marked-up version) was as close to a ‘carbon copy’ statement as possible while still offering some indication they are aware of the key psychological changes under Trump administration policy shifts. Yet the changes are more than just a few subtle adjustments, and that includes the composition of the voting members beginning with this first meeting of 2017 for the balance of the year. While they shifted some of the inflation anticipation language across the first couple of paragraphs, that remained remarkably the same. The single more aggressive stance there was taking the previous statements’ assessment that inflation ‘is expected’ to rise to 2 percent with the assertion that it ‘will’ rise to 2 percent. While that might have given some of the govvies bulls pause, they were comforted by the surprise for the public interest rate hawks that…
“The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction…”
This was one area where the ‘bond vigilantes’ feel it is appropriate for the Fed to allow just a little bit of tightening through modest reduction of its Brobdingnagian balance sheet in the face of almost assured fiscal stimulus to come. Yet maybe even that was more than should have been anticipated at the first meeting of the more dovish 2017 roster of FOMC voting members. As we have noted since mid-October, even some previous doves among the 2016 voting members had become more hawkish by late 2016. They have been replaced by folks who are, on balance, quite a bit more dovish. (See the bottom of page 2 of our marked-up version for the details.)
Yet even in the ‘steady as she goes’ statement citing that “…business fixed investment has remained soft…” (predictably as companies wait to see what really transpires on taxation and regulation), it notes, “Measures of consumer and business sentiment have improved of late.” Maybe that explains why a still accommodative statement from the Fed left equities sagging on concerns over things remaining kind of soft for now. Maybe.
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2017/02/08 Commentary: The Ultimate Kool-Aid?
2017/02/08 Commentary: The Ultimate Kool-Aid?
© 2017 ROHR International, Inc. All International rights reserved.
Extended Trend Assessments reserved for Gold and Platinum Subscribers
Commentary: Wednesday, February 8, 2017
The Ultimate Kool-Aid?
To wit, “It is very interesting that just about all of the Democratic legislators who have chosen to boycott the Trump inauguration are from ‘safe’ districts, and none are from districts that are at risk of going Republican in the 2018 bi-election. In other words, for the most part only those with little or no political risk have decided to drink the ‘boycott the inauguration’ Kool-Aid.” More on the next phase below, but first a more upbeat indication.
This morning saw the latest Organization for Economic Cooperation and Development’s (OECD) monthly Composite Leading Indicators (CLI, in our mildly marked-up version.) As noted in last month’s release, the OECD is now more realistically taking an upbeat view on most of the global economy. We sometimes criticize the OECD for expressing a positive view in their headline assessment when the actual indications are problematic or weak. However, this month’s headline “…growth gaining momentum in several advanced economies” seems a bit too downbeat for the indications.
Once again, this a net 4-month forward view (hence ‘leading’) as the 6-month projections are delayed by two months to ensure the accuracy of the data. Even so, it reinforces all of the upbeat expectations under the Trump administration’s lower regulation and tax plans. If outside of Italy and India the entire world is in a mutually reinforcing growth cycle, any further stimulation from Trump’s plans should be good for US and global equities.
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