I’m quite sure it isn’t intentional, but Donald Trump may be inadvertently keeping things moving along at just the “right” pace by simultaneously stimulating the economy and injecting just enough of “David Dennison’s finest covfefe” to keep things from overheating.
Friday’s jobs report was a blockbuster and Trump (who of course knew the numbers ahead of time) ended up effectively tweeting out the good news more than an hour ahead of the official release, as toddlers are wont to do when someone makes the mistake of trusting them with a secret.
At 7:21 Friday morning, the President bumped up against the boundaries of his patience when it comes to keeping positive developments that reflect well on him close to the vest and, unable to contain himself for another hour and nine minutes, teased May payrolls in a market moving tweet that, had it emanated from anyone but him, would have almost certainly been illegal.
The data helped stocks close an otherwise tumultuous week on a positive note and generally speaking, the upbeat mood spilled over into Monday.
But tempering the outlook is, well, Trump’s temper, something he lost (along with his proverbial shit) over the weekend on at least a half dozen occasions on Twitter.
He seemed to be particularly concerned about a leaked letter that revealed his legal team’s “strategy” in the Mueller probe. Basically, the “plan” (scare quotes there for a reason) is to assert that Trump can’t obstruct justice because he’s President. Also up for discussion (apparently) is whether he can actually just pardon himself.
Meanwhile, the administration has of course ratcheted up trade tensions with the decision to move ahead on tariffs leveled against the E.U., Canada and Mexico.
Well first thing Monday morning, just as markets were reveling in optimism about the U.S. economy on the heels of the jobs report and enjoying what is now a four-day rally in Italian bonds off last week’s fire sale lows, Trump picked up where he left off, tweeting, among other things, that he has the power to pardon himself, that the Mueller probe is unconstitutional, that Canada, Mexico and China are cheating U.S. farmers and that America has done so much losing “over so many years” on trade, that now, the only thing to do is “WIN!”
Everyone is taking all of that in stride for now, but the amusing thing about it is that there’s a certain sense in which he’s actually mitigating the risk that the U.S. economy will overheat (turbocharged as it is by late-cycle fiscal stimulus), by creating uncertainty on the domestic political front and by confusing the holy shit out of everyone on trade.
And listen, lest you should think this is just a belabored attempt to posit a market dynamic that doesn’t exist, consider these hilarious excerpts from a note penned by JPMorgan’s David Kelly on Monday:
A number of years ago, I worked for a Swedish asset management firm and this occasionally required me to journey to Stockholm. On these visits, I was generally impressed by the good humor and intelligence of my Swedish colleagues. I was surprised, however, by two things: The quantity of alcohol they could drink at night and the amount of strong coffee they could subsequently consume the next day.
For the most part, they carried it off without incident. However, it was a fine balance and could easily have tipped either way. In addition, a policy of over-indulgence in both stimulants and sedatives probably carried with it certain unpleasant side effects.
The U.S. economy finds itself in a similarly oddly balanced position today with a strongly stimulative fiscal policy being softened by the dampening impact of trade uncertainty.
Just to kind of spice that up a bit by couching it in Heisenberg terms, Trump is force feeding the U.S. economy good coke via fiscal stimulus and then, via his schizophrenic trade stance and ongoing war with the nation’s law enforcement agencies, providing an unlimited supply of Xanax. As the above-mentioned David Kelly notes, that’s a “fine balance” that could easily “tip either way.”
One way it could “tip” is that the U.S. economy could overheat and inflation could accelerate, forcing the Fed’s hand. The other way it could tip is that everyone could accidentally overdose on Trump’s combative tweets on the way to just selling everything on the assumption that sooner or later, he’s going to tank the global economy and/or create a full-blown constitutional crisis.
In the meantime, everyone has apparently resigned themselves to the fate of a functioning addict engaged in a perpetual quest to even out last night’s coke binge with five lines of crushed up Xanax at 4 in the morning.
And that’s ironic because if you didn’t know Trump is committed to sobriety, you’d certainly be inclined to think he was high on his own supply all weekend.