Morning Commentary
"In the aftermath of the U.S. elections, there is widespread expectation of a significant change in direction for macroeconomic policy." (OECD Report)
Not far from Trump Tower in Manhattan is the iconic statue of Titan Atlas holding up the world. The statue caused uproar when it was unveiled as many liken it to the musing of Italian dictator Mussolini.
Some think it also influenced Ayn Rand, whose Atlas Shrugged, is a cornerstone of libertarian thinking. I think it’s appropriate because of the news mostly missed on Monday.
The Organization for Economic Cooperation and Development made positive comments about Donald Trump and his policies, not only helping the United States but giving the world a shot in the arm.
Between tax cuts and fiscal policies, the OECD altered its economic outlook for the United States, which is likely to achieve less than 2.0% growth in 2016, along with the following:
The OECD, which had promoted fiscal prudence, is now on the Trump Train with respect to the positive economic impact from:
The report cautioned that the impact of these policies won’t have an immediate impact, but it will set the stage for sustained growth. On the other hand, the OECD expressed worry over “isolationist rhetoric” and a potential trade war. (I agree that trade deals can and must be amended, but a full-blown trade war would have devastating consequences –even if we come out on the winning end of the skirmish.)
Moreover, in a dig at the Federal Reserve, the OECD made the distinction between efforts to drive economies through a fiscal policy versus monetary policy, saying that ”Governments should work to pass more legislation and rely less heavily on central banks alone,” echoing what I have been saying and writing about for weeks.
It should be noted; however, the next couple of years will see a competitive fiscal policy around the world with China contributing as much, if not more, in the demand for economic building blocks (commodities).
Elaine Chao, Transportation Secretary
Elaine Chao is a part of the establishment and that’s a good thing, especially when it comes to getting the Trump infrastructure plan off to a blazing start. Born in Taiwan, Chao’s father founded one of the world’s biggest shipping companies, Foremost Shipping. In 1989, Chao was nominated to Deputy Secretary of Transportation by President George H.W. Bush. However, she is best known for her role as Secretary of Labor under George W Bush where she served for eight years.
The Dow Jones Transportation Index is on the verge of challenging its December 2014 all-time high.
Meanwhile, S&P Material sector is off to the races in unchartered territory, paced by Parker-Hannifin (PH), Caterpillar (CAT), and Cummins Engine (CMI).
I suspect that the momentum will continue for these sectors and materials in 2017, driven in part by Trump’s policies, and global excitement at the prospects of greater prosperity, and the removal of roadblocks to achieving it.
Today’s Session
The selection of Trump’s economic team is great news for the economy and stock market.
I’ve interviewed Mnuchin a couple of times, but I have had many conversations with Wilbur Ross over the years. He is the perfect turnaround specialist and has an understanding of trade better than anyone. This morning, the new appointees laid out goals that are exciting, but realistic:
There is even an olive branch of sorts going out to Janet Yellen as the new administration would like to operate under lower rates for the first couple of years.
OPEC
Don’t look now, but there might be a deal to curb, or at least cap, oil production. Crude is surging this morning, up more than 6%, on increasing belief this time will be different. Instead of agreeing to meet again, the Organization of Oil Exporting Countries might find a way to stabilize the price of their lone asset.
The scuttlebutt supports a potential move in crude north of $50.00.
ADP
The ADP jobs report has come in at 216,000 well above consensus of 170,000. We’ll have more details on the afternoon note.
Comments |
Great that OECD is not blinded by Keynesian thought and can actually see the possibility for a change in direction. Our economy is just like a supertanker, which when the wheel is turned takes three miles before it even starts to change direction due to the huge mass and physics. That being said, the experts are always inaccurate on the rate of change as it is a dynamic that is hard to model and project. Just as we fell faster than thought possible, we may in fact surprise on the way up. As the sentiment reading surprises you reported yesterday for instance point to the people getting what is coming, I believe it points to a faster growth than modeled as people change actions and begin to stake positions aggressively to participate in the coming boom. That is why the transportation index is such a good forward indicator. Cheers fellow capitalists!!!!! Ray Weldon on 11/30/2016 10:09:14 AM |
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