Trump Jr. and the markets

Posted: July 12, 2017 in Uncategorized

The latest controversy is a quite damning evidence of Russian meddling in the election and a very immoral behaviour of the Trump family.

It is bad (but the US has an history of meddling with other election, from Italy and Greece in the 70s, to the ’90s Colour revolution and the recent declaration that the US supports regime change in Iran).

Definitely King Trump and his family created a nepotism situation which even the Vatican should be jealous of. And they call it democracy.

Anyway, back to the data.

The market reacted as usual – kind of not cre – a brief 0.5% dip – immediately recovered.

It will be more interesting if the special prosecutor start digging I assume.

Still impeachment or charges are quite far and impossible to account for. They could even come, but in a few months – so we cannot worry about it right now.

But this new development will have some consequences anyway.

As the President gets bogged down in these fights, all the reforms (Tax, Obamacare and any meaningful legislations) will be harder to pass and find consensus.

Also, as uncertainty reigns supreme, also GDP growth will be slower about 2% (vs 3%) and Fed interest rates hikes and QE unwinding lower too.

In the last sentence, you can see why the market is not unhappy about this.

Aside black swan events that by definition cannot be forecasted, a recession in the US has always being provoked by the FED rising interest rate too fast to cool the economy and inflation.

So with lower rates for longer, the market can keep on rallying – unless the king falls.

As an institution you put on some macro trade in case things go wrong and keep investing.

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