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IS A GUNLESS REVOLUTION AT HAND AND WILL HISTORY REGARD TRUMP AS A GREAT UNIFIER?

Will there be a tectonic change in government?  President Trump is considering a 20% cut in the number of federal workers and an outright reduction in federal spending.  Historically a government spending cut is a reduction in the amount of a planned increase, not an outright reduction of “X” amount over the previous year’s expenditures as is the case with all other organizations.

This is yet another item the Washington establishment is yelling about.  I don’ think this is a political statement when I comment that I agree with the President’s proposal of reducing government spending and holding the bureaucracy accountable.   In fact I believe such a view is commonplace.

I have commented many times globalism is dead, replaced by nationalism.  I would like to digress for a moment.  Following WWI which was largely the result of hyper nationalism, pacifism rose, sowing the seeds for the nationalist governments of the axis powers.

Nationalism destroyed various governments, replaced by a bipolar world of “us” versus “them” and the rise of western democratic socialist state that should prevent the rise of a strong nationalist sentiment.

The bipolar western democratic socialist state morphed into the current multipolar globalist state with the collapse of the Soviet Union, ushering in the “New Paradigm” where wars, social upheaval and economic difficulties deemed as improbable.

The US acting as the proverbial unspoken role of the global policeman/referee increased the odds of relative global peace and economic tranquility via this globalist/multipolar environment.

As widely discussed, the US publically abandoned this role as global policeman in 2010, a role essential for multipolarity to exist.  Global tensions have since risen exponentially.

In many regards, I think the social democratic state has failed in its primary mission of ensuring economic tranquility.  Globalism also failed, partially because the withdrawal of American influence and from the perceived economic injustices because of this globalism.

Writing cynically, who ever thought communist and xenophobic China would now become the champion of globalism? Many should have considered this idea given that China is an export based economy defined as the majority of its economic production is exported to the US, Japan and Europe.  If political sentiment changes in these three dominant markets, the Chinese economy would severely suffer.

About forty years ago I recall reading Reader’s Digest column titled Laughter is the Best Medicine.  One indelible quote was “The US dream is being interrupted by the Japanese alarm clock.”  Does this pertain to China or some other Asian country today, the result of the “Price is the only determinate of purchasing decision” mentality?

President Trump’s proposals are tectonic.  Whether it is the bidding out of drug prices, a proposal to reduce the size and spending of government, permitting a health insurance marketplace similar to that of the auto insurance market place, or the creation of a more “balanced” global trading environment, today is different than yesterday.

Change is always difficult as many fear the future.  Moreover the largest corporations have spent billions to preserve the status quo, a status quo that has perhaps tectonically changed.

Has a gunless revolution occurred, a revolution that will have a massive impact upon the economy and the markets, where perhaps in four years the small and value capitalized companies will have the same swagger as today’s mega capitalized global growth companies?

Eight years ago, Inauguration Day was filled with hope and unity.  Today many think Inauguration Day is one of dismay and division.

What are the odds history will regard Donald Trump as the “Great Unifier?” Wow!!   This is as incredulous as too writing Trump would be the forty fifth president 18 months ago.

Perhaps the only certainty to write for many expectations are low for a successful Trump Administration.  This sentiment however is not shared by Main Street America where optimism rose by the greatest amount since 1980 and the absolute level is at levels last experienced in December 2004.

It has been written many times America elects and gauges its leaders by economic and small business creation.  If Trump is the champion of Main Street America, Main Street America defined as small companies that typically create 90% of jobs and vast majority of the country’s wealth, history regarding Trump as the great unifier is not as outlandish as today’s establishment is pronouncing.

Commenting about yesterday’s market action, the Dow fell about 0.28% and the NASDAQ led by healthcare dropped about 0.70%.  Treasuries were up about ¾ point.

Last night the foreign markets were mixed..  London was up 0.11%, Paris down 0.63% and Frankfurt down 0.03%.  China was down 0.43%, Japan up 0.43% and Hang Sang up 1.13%.

The Dow should open flat.  The 10-year is off 9/32 to yield 2.36%.

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.