EUR 23.18 For Business Accounts Only

The Weekly Track learning-moments

- The Weekly Track – Learning Moments by Bob Savage
http://track.com/articles/the-weekly-track-learning-moments/

When the story that propelled you onto a journey changes, so too should your direction. That is the learning moment from last week where the uptrend in equities stalled and saw its first 1% loss since October simultaneous to the US President learning that US healthcare is complicated and reform difficult. Learning to look through the present political noise will be for another time but the confidence game for markets and the economy will be wiser nevertheless. The swamp in Washington hasn’t been drained and the onslaught of doubters is on the rise. The key for the uptrend in the S&P500 was never healthcare but taxes. The reality is that as US House Speaker Ryan said Friday, the healthcare defeat makes tax reform more difficult. The silver lining for the US in the failure of the Republican Congress to charge through with a healthcare repeal and replace plan forces everyone to work with the Democrats to come up with a bigger solution. This was the downfall of Obamacare 7-
years ago and perhaps is the key for today. The politics of consensus building are the key learning moment for the new President as he shrugs off the split in his party and moves on to tax reform. If Trump can play conservative Democrats against the Tea-Party Republicans then he may create a real center from which rule. The focal shift to taxes will matter to markets just as much as the shine coming off his control of the Congress.

The ability for Trump to lead requires more finesse to accomplish his policy goals. Similarly, we learned that Speaker Ryan isn’t the President as he has no bully pulpit. But there was more to last week than just politics and more lessons too, with the horror of a UK terror attack at Parliament reminding many of the risks to Europe. This didn’t help Le Pen as she struggled with Macron in the first debate but it does make the role of the press in focusing on terror a topic. The ability to see through oil price falls and European PMI strength with be another part of the debate as the world tries to reconcile a weaker USD even as rates remain negative in Europe and Japan. The relationship of the EUR/JPY as the race to the bottom measure of deflation continues to wreak havoc on many as they try to learn what really matters to risk ahead – central bank policy, corporate profits or consumer demand. If EUR/JPY ends the 1Q below 120 that may be telling us volumes about the r
isk appetite for 2Q as well.