Thoughts {01.31.17}

Trump added to what many see as a chaotic beginning to his administration, by firing his acting Attorney General last night over her refusal to close the nation's borders under the provisions of his executive order.   Trump's actions since becoming President have been frenetic and are as polarizing to the opposition on the left as some of the executive orders former President Obama issued were to the right.  

The markets had a bad day yesterday, declining a bit over a half percent.  Some of that was surely based on the President's actions but stocks had become very overbought as well.  In that context  they might have used any excuse yesterday to sell off.  It is hard to read anything into these short term gyrations, particularly since the heavy lifting on economic policy hasn't yet been laid out.  Congress is also going to have a say on those policies.

I am amused by the folks who seem to think I am either for or against the President so let me state what I am trying to do with this blog.  Like most Americans I have political views.  I believe my views are like most Americans somewhere between right and left.  To paraphrase former President Obama my politics runs more towards purple than any deep shade of red or blue.  However,  I am old enough now to know that others might not feel that way about how I see the political world.   Because I am writing a blog about the markets, I strive as much as humanly possible to keep those beliefs out of my writing.  I talk about the political arena solely to explain how I perceive events or political escapades or world realities will impact market returns.  I could for example say that the Affordable Care Act {or Obamacare as it is more popularly known} has serious financial issues that need to be restructured.  I can also say that it's too bad that there was not more of an attempt by the Democrats to develop more of a bi-partisan consensus when it was voted into law.  Neither of those statements would in my mind be political as Obamacare has a serious funding problem and the Democrats had no real interest in brings Republicans on board at the beginning of the Obama Presidency.  Republicans would have likely done the same to their opposition if the tables had been turned.  The Republicans now control the executive and the legislative branches of our government and will likely pass their economic programs with little or no help from the Democrats.  That's just the nature of our winner-take-all system of government.  I can also say it's too bad the GOP will look for as little input as possible here as well.

I may strive to be neutral but the press, particularly the coastal based major media outlets, has no such compunction.  The press hates Trump. Probably only Richard Nixon has been loathed more by the "4th Estate".   He made them look bad during the campaign by exposing their biases along with Wikileaks.  They will do everything they can to bring him down now.  I caution you on this not because I want to influence your views but because the press will distort almost every aspect of whatever economic plan the President puts forward.  Regarding that pay attention to how the market reacts, not necessarily on any given day but over a series of weeks.  If the plan is promising economically then stocks should react positively.  For example any overhaul of the tax code is going to have winners and losers, with those on the losing end squeaking the most in public.  Those cries of anguish will be presented in a manner to appeal to the basic instincts in their audience.  They won't tell us anything about the long-term potential positives that might result from the changes.  Those changes and how they impact our economy must be our litmus test in regards to the markets.  These changes, for good or bad, are what will drive market returns in the years to come.