President Donald Trump has decided to remove Stephen Bannon from his role as White House chief strategist, though the timing of his departure is unclear, the New York Times reported.
The departure of Bannon, the chief executive of Trump’s presidential campaign and an architect of his election victory, removes a champion of conservative populism from the White House. The former chairman of Breitbart News, Bannon served as a link to the so-called “alt-right” movement attuned to the attitudes and opinions of the president’s base.
Trump is still debating the time and manner of Bannon’s exit and may still change his mind, the Times reported, citing two administration officials.
PG View: Why this is a risk-on event is lost on me.
When Donald Trump won the race for the White House last year, markets rallied. The so-called “Trump trade” rested on the hope that the US president would deliver business friendly reforms that would boost growth. This was a bit of a misnomer: what executives and investors have really been betting on for most of this year is a “Cohn trade”.
…The question that investors and executives are asking is whether that “Cohn trade” still works. It certainly looks like a higher risk bet. Never mind the fact that Mr Cohn and John Kelly, the president’s chief of staff, failed to stop Mr Trump from making his inflammatory comments this week about the Charlottesville protests. What is most telling is that this disaster happened at the very moment that Mr Cohn’s star was supposed to shine.
…This does not necessarily mean that all the investor optimism around the Cohn trade has disappeared. Stock markets are still flushed with oodles of central bank liquidity and boosted by moderate economic growth. And one important detail about the Cohn-cum-Trump trade that is often forgotten is that markets did not merely rally because business hoped reforms would get done. Executives were also excited about what might not occur under Mr Trump — Barack Obama-style regulatory creep.
CNBC/Berkeley Lovelace Jr./08-17-17
The markets would crash if top White House economic adviser Gary Cohn resigns, Yale School of Management’s Jeffrey Sonnenfeld told CNBC on Thursday.
“I don’t want to be an alarmist, but there is a lot of faith that he is going to help carry through the tax reform that people are looking for,” Sonnenfeld said on “Squawk Box.”
“I think if he steps away, it would crash the markets,” he said.
PG View: Risk appetite has been diminished on yet another layer of political uncertainty, which is weighing on stocks and providing a tailwind for gold.
President Donald Trump on Monday signed a memorandum that could lead to a trade investigation of alleged Chinese theft of intellectual property.
The measure directs U.S. Trade Representative Robert Lighthizer to look into options to protect U.S. intellectual property. It does not take any specific action against China at this point.
“We will safeguard the copyrights, patents, trademarks, trade secrets and other intellectual property that is so vital to our security and to our prosperity,” Trump said.
He added: “This is just the beginning.”
PG View: This move comes at a critical time. While protecting intellectual propoertty is really important, the U.S. is simultaneously seeking China’s help in deescalating the North Korean situation. This seems unlikely to help that cause. Amid a very real risk of a real war with North Korea, potentially starting a trade war with China seems less than prudent.
BusinessInside/Pedro Nicolaci da Costa/08-09-17
In normal times, a looming changing of the guard in the world’s most powerful central bank would be dominating Wall Street’s attention. But these are not normal times.
With headlines consumed by Donald Trump’s chaotic presidency — investigations into possible campaign collusion with Russia, the collapse of healthcare legislation promised for seven years, and now a diplomatic standoff with North Korea — the strong likelihood that Trump will replace Janet Yellen with Gary Cohn, the former president of Goldman Sachs who now leads the president’s National Economic Council, has barely registered.
“Any time you pick someone who’s got a deep academic track record, like a Bernanke, like a Yellen, you have a highly predictable setting for monetary policy,” Neal Soss, the vice chairman for fixed income at Credit Suisse Securities, said in an interview with Bloomberg TV.
…”Gary Cohn doesn’t have that kind of grounding, so from the point of view of Fed watchers there’s at least an initial phase where you have to view that as a less predictable figure and a less predictable policy stance.”
Inside President Donald Trump’s White House, no one seems to be looking forward to September.
Senior officials have described the coming month as “brutal,” “bad” or “really tough” because of the confluence of complicated issues — but they also say it’s pivotal to getting the presidency back on course.
…“The stakes are very high in September,” said Jenny Beth Martin, who leads the Tea Party Patriots, a conservative grass-roots group. “There is a lot to do in a very short period of time.”
PG View: September also marks the beginning of a cyclically strong period for gold. Now may be the time to buy.
Washington Examiner/Susan Ferrechio/08-08-17
Both Democrats and Republicans in Congress are poised to stand in the way of lifting the nation’s borrowing limit next month, increasing the chances of real problems for House and Senate leaders as they try to increase the debt ceiling by an end-of-September deadline.
House and Senate conservatives have long insisted that debt ceiling increases be accompanied by spending reforms, and that hasn’t changed this year, even under a Republican president who is insisting on a “clean” debt ceiling increase.
…Potentially more troubling for the prospects of a debt ceiling increase, the largest group of conservatives, the Republican Study Committee, announced Tuesday it will also oppose a straight increase without spending cuts.
That means if a “clean” debt ceiling hike is to happen, it will need support from a majority of Democrats. But this year, that may not happen.
Republican Senate leaders on Tuesday delayed a vote on the party’s controversial replacement for Obamacare until after July 4 amid a frantic effort to round up enough votes and avert an embarrassing defeat.
Senate Majority Leader Mitch McConnell had hoped to hold a vote before the holiday, but Republicans lack enough support for a bill that’s been criticized by both the moderate and conservative wings of the party.
PG View: That means that the balance of the President’s agenda is delayed as well. The stock market doesn’t like it . . .
Bloomberg/Tim Ross & Alex Morales/06-12-17
The U.K.’s governing Conservative Party headed for a fresh civil war over Europe as Theresa May prepared for a showdown with her lawmakers that could hasten the end of her premiership.
The botched election campaign opened a new front in the Tories’ decades-long internal conflict over Britain’s membership of the European Union. Some of May’s most senior ministers are plotting to soften her approach to leaving the bloc, potentially keeping the country in the single market and customs union. By contrast, hard-line Brexit supporters are determined to force through the prime minister’s plans for a clean break.
Telegraph/Patrick Sawer & Christopher Hope/06-09-17
European Commission President Jean-Claude Juncker says he hopes there will be no “further delay” to the start of Brexit negotiations.
Mr Juncker said: “As far as the Commission is concerned we can open negotiations tomorrow morning at half past nine.”
He spoke after the EU’s chief Brexit negotiator said talks on Britain leaving can only begin when the UK is ready.
PG View: An already complex situation has become even more complicated and uncertain.
Britain’s exit from the European Union has been plunged into uncertainty.
Theresa May has not secured the clear mandate that she sought for her version of a hard Brexit.
When she called the election, she declared: “Every vote for the Conservatives will make me stronger when I negotiate for Britain with the prime ministers, presidents and chancellors of the European Union.”
Well, she is not stronger.
She has fewer seats than she started with.
As a result, it will now be hard for the government – formed with the help of Northern Ireland’s DUP – to start talking to the EU in nine days time as planned without rethinking its strategy.
Theresa May has said she will form a government with the support of the Democratic Unionists that can provide “certainty” for the future.
Speaking after visiting Buckingham Palace, she said only her party could form a “legitimate” administration after winning the most seats and votes.
She said she would work with “friends and allies” in the DUP to take forward Brexit, saying “let’s get to work”.
The Tories are eight seats short of the 326 needed to command a majority.
FT/Roger Blitz, Michael Hunter & Michael Mackenzie/06-09-17
The pound fell more than 2 per cent and prompted a sharp divergence in UK equity prices after the general election result deprived Conservative prime minister Theresa May of a parliamentary majority, plunging the country into political uncertainty less than two weeks before Brexit negotiations start.
…The uncertainty created by the election result ahead of the country starting negotiations with the EU over leaving the trading bloc was primarily being expressed in currency weakness.
“We must consider that a political risk premium will hang over the pound for the foreseeable future,” said Stephen Gallo, a foreign exchange strategist at Bank of Montreal. This will “put a ceiling on the pound”.
FT/Katie Martin & Robin Wigglesworth/06-08-17
The exit polls are in. They suggest the Conservatives are on track to win 314 seats, with 266 to Labour and 14 to the Liberal Democrats. That means the Tories are shy of a majority, and we are heading for a hung parliament.
Sterling has taken a heavy blow, falling 1.4 per cent on the day to $1.2719 at just past 5pm in New York, which would be its biggest one-day drop since early October.
PG View: Gold is nonplussed, trading little changed from where it spent much of the day.
Brits headed out Thursday to vote in a general election that’s still managing to get some people keyed up, even though it’s the third time in just over two years they’ve been called to the ballot box.
“It could be very surprising, the result. So we’re living more on excitement today, than actual results,” said an elderly woman voting in central London who declined to give her name.
“We’re all feeling very odd in England at the moment, because we’re not sure what’s going to happen,” she said.
Washington Post/Damian Paletta & Robert Costa/05-22-17
President Trump on Tuesday will propose cutting federal spending by $3.6 trillion over 10 years, a historic budget contraction that would severely ratchet back spending across dozens of programs and could completely reshape government assistance to the poor.
…Mick Mulvaney, director of the Office of Management and Budget, said the spending plan, titled “A New Foundation for American Greatness,” is focused on protecting taxpayer money and cutting spending on programs that are ineffective or encourage people not to work.
…The proposed budget refocuses decades of U.S. spending — both foreign and domestic — to reflect Trump’s belief that too much taxpayer money is simply given away.
CNBC/Berkeley Lovelace Jr./05-23-17
President Donald Trump’s budget proposal is likely to help produce 1.9 percent economic growth, not 3 percent, former Office of Management and Budget Director Jim Nussle told CNBC on Tuesday.
Nussle’s comment came the morning after Trump’s proposed fiscal 2018 budget became public. The White House said it is a key component in pushing economic growth to 3 percent.
The Congressional Budget Office currently estimates, however, growth at about 1.9 percent and the Federal Reserve projects the economy will expand at a 1.8 percent annual rate.
Politico/Nancy Cook & Burgess Everett/05-18-17
Republicans’ long-held dreams of tweaking Medicaid, repealing Obamacare and overhauling the tax code appear in more jeopardy than ever as scandal and investigations beset President Donald Trump’s White House.
Some Republicans fear that subpoenas and congressional inquiries will swamp the time they need to pass a health care or tax bill in 2017 — not to mention renegotiate NAFTA, unify behind a $1 trillion infrastructure plan or build that border wall.
“Everything affects our work right now. The more controversy we have the more difficult it is to do things,” said Senate Finance Chairman Orrin Hatch (R-Utah). “But this place is filled with controversy, so if you don’t understand that, you’re in the wrong job.”
Politico/John Bresnahan & Rachael Bade/05-16-17
…Republicans are privately beginning to worry that they may one day have to sit in judgment of Trump, or that more damaging information from Comey could force the president to step down.
…More Republicans have openly discussed the possibility of a select committee or the appointment of a special prosecutor to look into the Trump-Russia connection. It’s still a minority of GOP lawmakers, but Republican leaders are watching closely.
…And if Republicans are paralyzed and can’t pass anything despite control of the White House and Congress, how can they justify their majorities when they go before voters next year?
PG View: Whether the accusations are true or not, they provide a monumental headwind to anything the President was hoping to accomplish.
FT/Jamie Chisholm & Michael Hunter/05-17-17
Investors were retreating to the sidelines on Wednesday and seeking havens on concerns that President Donald Trump’s ability to push through his pro-growth policies will be sidelined by deepening political controversy.
Reports that Mr Trump sought to interfere in an FBI investigation is the latest controversy to ensnare the White House, damping global risk appetite and causing some investors to seek the perceived safety of government bonds, gold and the Japanese yen.
PG View: In a separate article, the FT acknowledged that the deepening controversy “delivered a boost to the price of gold.”
Bloomberg/Gregory Viscusi, Helene Fouquet & Marc Champion/05-11-17
On June 11, French voters will return to the polls for legislative elections, followed by a runoff a week later for districts where no candidate wins outright—typically most of them. While the president’s party often gains a majority or a strong plurality in the National Assembly, this year things look different. For the first time, France’s two main parties were absent from the second round of the presidential election, and they’re seeking to use the legislative vote to bounce back. Macron, meanwhile, has never held elected office. He founded his party just over a year ago and has little on-the-ground infrastructure to field candidates or get voters to the polls. “Macron’s biggest challenge is to win the battle for Parliament,” says Dominique Reynié, a politics professor at Sciences Po university in Paris. “Without a majority, he’d have only limited power.”
PG View: A politically hamstrung President means the status quo will prevail in France. Status quo is the last thing the people of France want . . .
Bloomberg/Shannon Pettypiece, Steven T. Dennis & Laura Litvan/05-11-17
President Donald Trump’s firing of FBI Director James Comey is an unwelcome distraction for a White House already straining to enact its agenda and could hamper its efforts to pass a repeal of Obamacare and cut taxes.
Comey’s ouster on May 9 polarized Democrats and unnerved some Republicans, overshadowing almost all other business at both the Capitol and the White House. Trump’s aides and his congressional allies struggled on Wednesday to defend the decision, diverting precious time from other key issues.
With limited manpower and political capital, the White House and Congress can wage war on a finite number of fronts. Trump is already mired in a battle over health care and is preparing for a fight over government spending, pushing his plan to slash corporate and individual taxes further into the future. All of that gets harder with the need to confirm a new FBI director and fend off demands for an independent Russia investigation.
French voters chose a centrist reformer over the nationalist right on Sunday by electing Emmanuel Macron as their next President. The question now is whether Mr. Macron can deliver on his promise to reform France’s sclerotic economy and diminish the Islamist terror threat.
Mr. Macron’s decisive victory is as much a rejection of the far-right National Front as an endorsement of his platform.
…Mr. Macron’s ability to push reform will depend on the strength of the parliamentary coalition he can assemble. If En Marche! fails to win a majority in June’s parliamentary vote, he should hope the Republicans do. One way to set the tone for the June vote would be to invite Republican heavyweights to join the Macron cabinet.
…The French center held, barely. If Mr. Macron fails to deliver faster growth, France may not be so lucky the next time.
Reuters/Mathieu Rosemain & Matthias Blamont/05-08-17
Emmanuel Macron was elected French president on Sunday with a business-friendly vision of European integration, defeating Marine Le Pen, a far-right nationalist who threatened to take France out of the European Union.
The centrist’s emphatic victory, which also smashed the dominance of France’s mainstream parties, will bring huge relief to European allies who had feared another populist upheaval to follow Britain’s vote to quit the EU and Donald Trump’s election as U.S. president.
…it was a record performance for the National Front, a party whose anti-immigrant policies once made it a pariah, and underlined the scale of the divisions that Macron must now try to heal.
…His immediate challenge will be to secure a majority in next month’s parliamentary election for a political movement that is barely a year old, rebranded as La Republique En Marche (“Onward the Republic”), in order to implement his program.
Sunday’s presidential duel pits Mr Macron against Ms Le Pen and their clash of visions for the eurozone’s second-largest economy. Opinion polls suggest he will win but the fight for office has exposed a divided country: one part happy, the other unhappy; one urban, the other rural and suburban; one embracing internationalism, the other seeking to erect barriers. They are the same faultlines shaking other western democracies, splitting those who feel they have gained from the far-reaching postwar liberal shift towards an interconnected world, and those who fear they have lost, or will lose out.
…The debate over the impact of globalisation is likely to dominate the five-year term of France’s next president.
To “Frexit” or not to “Frexit”?
That’s been one of the biggest concerns for investors in recent months and on Sunday the question is likely to finally be put to rest when the French vote in the second and final round of their hotly contested presidential race.
…“If Macron wins, we will go back to business as usual,” said Philippe Waechter, chief economist at Natixis Asset Management.
“If it is Le Pen, she will target a Frexit. She wants France to exit from all European institutions. The European institutions are based on the French-German couple and if Le Pen wins, it will be only Germany and probably it will be the start of the decomposition of all European institutions,” he added.
CNN/Manu Raju & Ted Barrett/05-01-17
Bipartisan congressional negotiators reached a critical agreement late Sunday on a massive spending bill that if approved by the House and Senate would fund the government through the end of September, senior aides from both parties told CNN.
The plan would add billions for the Pentagon and border security but would not provide any money for President Donald Trump’s promised border wall with Mexico.
Votes in both chambers are expected by the end of the week.
BlackRock Inc. Chief Executive Laurence Fink cast doubt on the viability of the Trump administration’s tax plan, saying that if the proposal adds to the country’s deficit, it will create a “severe issue.”
Mr. Fink, who runs the world’s largest asset manager, also called the possibility of sustainable 3% growth unlikely. Part of the challenge the U.S. faces, Mr. Fink said, is demographics. Baby boomers, the largest living generation in the country is aging, reaching retirement age.
“With our demographics it seems pretty improbable to see sustainable 3% growth,” Mr. Fink said at an investing conference hosted by research firm Morningstar Inc. in Chicago.
AP, via CNBC/04-28-17
With just hours to spare, Congress easily approved a short-term spending bill Friday that would prevent a partial federal shutdown over the weekend. But on President Donald Trump’s 99th day in office, lawmakers were leaving until next week without completing two other measures he’s coveted: A Republican health care overhaul and a budget financing government for the entire year.