Markets might not have a hold on Trump

Good morning. Tired of uncertainty? Too bad: the Trump administration again fell back on its prices on Canada and Mexico, giving a month of one month to all goods in accordance with the American-mexico-Canada (USMCA) agreement, the Alena successor that President Trump has negotiated in 2020. All together: No! A! Know! Nothing! Send us an email: robert.armstrong@ft.com and aiden.reiter@ft.com.

Trump’s sensitivity to markets

One of the standard shots of the Trump administration analysis is that the markets, if nothing else, will provide a railing. If he passes through economically destructive policies on, let’s say, prices or expulsion, shares or obligations would encourage him to retreat. It’s “Trump put”.

We could see the confirmation of this idea in the events of the last days. Trump has imposed prices in Canada and Mexico which, according to the Orthodox Economics, will harm the American economy and, according to Corporate America, will harm companies. Actions, apparently in response, had a few volatile and unpleasant days. And, as expected, the prices have been delayed several times or modified. Protes from the Administration – The Secretary of the Treasury adage He focuses on Main Street and not Wall Street, the president saying: “I don’t even look at the market” – a brittle and defensive noise in this context.

The problem with this reading is that, despite a lot of sound and fury, the markets simply did not evolve much. The S&P 500, the index that everyone looks at, is down 7% of its top of all time less than a month ago. Treasury yields of ten years have dropped sharply from their summits in January, and this drop is almost certainly due to a decrease in growth expectations. But the administration likes lower rates and the lower dollar; The president boasted of the drop in the rates of his speech at Congress on Tuesday. Whether he is not aware of the malicious cause of the decline or that he is simply happy to slide on it, is unknown. It would therefore not argue that the thesis of the contract-controlled-controls has not been put to an appropriate test.

But we can come back to the first term Trump to get advice. Jeremy Schwartz from Nomura did it and concludes that

The history of Trump’s first term suggests tolerance for relatively high pain for the weakness of the equity market. . . The simplest and widest proof is that Trump has chosen to degenerate the trade war in 2018 (one of the worst non -recessioners for the performance of shares in recent decades). It was also a year with mid-term elections. . . At a more micro level, we also see little evidence that Trump timed his pricing ads to manage the stock markets.

Interestingly, Rafael CH of Signum Global Advisors examined the same story and came to a slightly different conclusion. He found that in most cases where Trump made a particularly strong proposal or threat of policy, whether steel and aluminum prices on Mexico or by meeting Xi Jinping, he fell mostly when the markets moved against him. But the market decision had to be maintained: a decision of more than two and a half years percent maintained on average for more than a month. There is little responsiveness to short -term market movements. And, as CH points out, we just don’t have any sustained market falls in the second Trump administration, so we do not know if it will follow the same model as the first.

CH makes another important observation. The reference point for market decreases is important. Stockings Or? He stresses that members of the current administration have started to talk about how the markets have evolved since the day of the inauguration, but have now come to talk about market performance since the day of the ballot.

In short: we don’t know if there is a Trump.

Learn more about the slowdown and an overview of the jobs

Over the past two weeks, there has been a change of atmosphere on economic prospects. The prices and the Ministry of Effectiveness of the Government weigh on the feelings of investors and consumers. At the same time, I do not have much difficult data (that is to say, no survey). And some of the data that frightened the market is not as bad as it initially appeared.

Although the market is concerned about the estimates of the ISM survey two weeks ago, the official release was not horrible. Manufacturing and services have continued to develop, and services have seen care in most sub-indices. While Michigan Senture Survey was worrying, the market may read too much. At a time when emotion is high, investigations can be misleading.

The same could be said of recent forecasts. A very bad estimate of the GDPNOW for the first quarter of the Atlanta Fed received a lot of attention:

But the GDPNOW model is the problem here. Societies are prices in mind by increasing imports, and these imports are negative for GDP. But these imports will be offset by an increase in storage, which is positive for GDP that the model does not capture, as our colleague Chris Giles explains.

Instead, most of the difficult data we have are solid or have shown weak market segments that were already struggling. It seems that the market was concerned about the beginnings of weak housing two weeks ago. But the housing market was already broken, and it was not really a change. The initial unemployed complaints that we obtained two weeks ago was also solid and showed no early damage to the Doge cuts.

All this puts the job report today in a clearer focus.

The first indicators we got this week suggest that it could be a bad gear. The ADP’s private salaries report on Wednesday was appalling. He showed that employers have added only 77,000 jobs last month, well below the January issue and just over half of the consensus estimate. The Challenger survey, which follows the job cutting announcements, gave an equally dark image. The planned job discounts have more than doubled at 172,000, and there was a major increase in the federal government’s announced cuts. Weekly data from the Bank of America card showed that consumer spending resumed national last week – but it fell to Washington DC, where Dogi frightened workers.

We should see a certain impact of the Doge in the job report today. But overall, the data is not so bad. The change of atmosphere could still be vibrations.

A good reading

Friendship.

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