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Trump = Uncertainty!


Overnight equity markets were weaker, while bond markets were higher, but the size of the moves was not all that important. As for the U.S. stock market, the futures took a tumble preopening, for no particular reason that I could see, and the indices were weaker to the tune of about 0.75% through midday, with the Nasdaq doing a bit worse.

In the early afternoon the market bounced a bit and with a couple of hours to go, when I had to leave, it was 0.5% lower, with the Nasdaq still the heaviest. Please check the box scores for the final outcome. Away from stocks, green paper was quite a bit lower, oil gained 1%, and fixed income was higher, as were the metals, as they added about 0.5% (all of this with two hours still to go).

A Clear Case of Effect-and-Cause I saw various reports blaming today's weakness in the dollar and the stock market on Trump's press conference. But if that were the case why weren't those markets even weaker yesterday? More likely, as I said in Wednesday's Rap, folks had anticipated miracles from Trump as a consequence of the euphoria that has developed, which I have been discussing.

I noted on Tuesday that I felt the market might be exhausting itself, and that could be precisely what is occurring. Obviously, we won't have a really good feel for that until the stock market breaks and we have some sort of a failing rally, but this is about the timeframe where it is somewhat logical to expect the market to run out of gas, since it has mostly been a function of emotions (hope and greed) running wild.

The fact of the matter is as I have discussed: financial markets are wildly distorted, it is going to be a very tall and difficult order to get the economy "fixed" without experiencing pain from the financial markets, and as I have repeated over and over again the only thing we can be certain of is there is going to be a great deal of uncertainty.

Just Think Of It As a Box of Chocolates It would appear that many folks haven't been mentally prepared for that. For example, in Dennis Gartman's letter today he was making the case that the dollar was weak because of the press conference and went on to opine: "We are now put on notice that the next four years shall be filled with confusion bordering on the manic. We are put on notice that any and all things economic and political are and will be taken to task by Mr. Trump, brutally and without equal notice. We are on notice that surprises will be the order of the day and that volatility is the harshest of realities. This is our lot; we shall have no choice but to make the most of it, if anything can indeed be made of it at all."

To that I would say, I don't believe we only learned that yesterday. That uncertainty is the one thing all along we could be sure we would be getting, which is why I have emphasized that point. Trump will be blamed for many problems that are his fault, and many that aren't, and it will be important to see how he reacts to all of that and how markets react to him. In any case, I continue to believe 2017 is going to be problematic for financial markets and uncertainty and volatility are the one thing we can count on.

Housekeeping Speaking of volatility, there will be no Rap tomorrow as I will be traveling, but Ask Fleck will run as usual.