Tags: Trump Administration | Political | Theater | Trump | Accomplishments | Congress

'Political Theater' Stands in the Way of Trump Accomplishments

'Political Theater' Stands in the Way of Trump Accomplishments
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Tuesday, 13 June 2017 10:28 AM Current | Bio | Archive

U.S. politics offer some interest today.

Yesterday, we got President Donald Trump’s first cabinet meeting with the entire cabinet present where we saw each cabinet member take terms to praise Trump and thank him for the blessing of being able to work for him.

The Treasury Department also released a 149-page report to the president, showing how the regulatory burden on the 12,000 banks and credit unions operating in the U.S. could be eased through policy actions.

The Financial Times comments on the report: “While some of the measures would require the help of Congress, Steven Mnuchin, Treasury Secretary, said that he and his team had focused on changes that could be implemented without delay, by the heads of regulatory agencies.”

For investors, it might be good to keep in mind that some of the policy actions and measures described in the report like changes to the Consumer Financial Protection Bureau’s (CFPB) authority or structure, or the applicability of the Volcker rule, will need the help of Congress.

Analysts already have commented that some of the more sweeping measures could be difficult to pass in the Senate, where Republicans are reliant on Democratic support.

Attorney General Jeff Sessions will testify in an open session to Congress with the “Russian question” relatively high on the target list.

The Muslim travel ban can also conceivably be an issue given Trump’s criticism of the Department of Justice over that, and the fact that the ban was again defeated in the lower courts on Monday while the Supreme Court expected.

Does this all matter to markets?

Trump has the support of Republican voters. Trump is likely to have the support of — or at least to have very limited opposition from — Republicans in Congress.

So extreme scenarios such as removing the president should be ignored.

However, despite Trump’s claim to have passed more legislation and have done more things than almost any president in U.S. history, the facts suggest that Congress has not passed any major legislation. Political theater makes it more difficult for legislation to be passed, at least in the near term.  

Beside that, today we got the NFIB survey of small business sentiment.

The May survey came in strong as it matched April’s strong performance at 104.5, reflecting the continuation of the very high level of optimism reached in the post-election months that pushed the index to the highest level in 12 years on expectations of tax cuts, healthcare reform and deregulation.

Labor market indicators remained strong, capital spending remained high, and reports of improved sales trends also increased.

The Producer Price Index for final demand was unchanged in May, seasonally adjusted, the U.S. Bureau of Labor Statistics reported. Final demand prices rose 0.5 percent in April and edged down 0.1 percent in March. On an unadjusted basis, the final demand index increased 2.4 percent for the 12 months ended in May.

As the PPI excludes exports, these data are a good indicator for the corporates’ pricing power. Excluding food and energy, a 2.4 percent rise y/y remains acceptable in a low-inflation environment and should not change the Fed’s plans for tightening.

In the United Kingdom, it’s reasonably safe to assume that members of the British Conservative Party did not take it in terms to praise Prime Minister May and thank her for the blessing of being able to work for her at the Party meeting that was held on Monday.

However, it seems equally clear that the Prime Minister May is not going to be replaced in the very near term, not at least, perhaps, because the last thing the Conservative Party wants is another general election right now.

The government’s legislative agenda is not yet ready to present to Parliament, which is, in part, because:

  • There are still negotiations to get another Party to support the legislative agenda, and
  • Because it takes several days for the ink to dry on the goat-skin vellum on which the legislative agenda must still be written out in the U.K.

It’s maybe somewhat surprising, but for investors it might be helpful to keep in mind that this means that the Brexit negotiations can only proceed in the most desultory of manners.

Yes, the United Kingdom has a government, of course, but it is not really authorized to negotiate on behalf of the country at the moment.

Etienne "Hans" Parisis is a bank economist who has advised global billionaires and governments on the financial markets and international investments.

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Political theater makes it more difficult for legislation to be passed, at least in the near term.  
Political, Theater, Trump, Accomplishments, Congress
Tuesday, 13 June 2017 10:28 AM
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