Today is the Inauguration. I vividly recall President Obama’s 2009 inauguration speech. While I did not vote for him, I found his comments hopeful and uplifting, thinking give this guy a chance to see if he can unify and heal the country.
Unfortunately I believe President Obama accomplished the opposite for leadership is about making people believe they can accomplish the impossible, extending the proverbial hand over the wall and pulling the person up versus pushing the person down. Leadership utilizes enthusiasm, the force multiplier. To unite rather than divide.
What will be the headlines of January 20, 2021? Expectations are low that President Trump can accomplish any of the above, a view I do not share. President Trump is challenging the Establishment in a manner that it has not been challenged in at least a generation. The President owes his allegiance to The People not to mega sized corporations, NGOs/GOs or any other who are/were in today’s/yesterday’s centers of influence.
If President Trump accomplishes half of what he has suggested, the sentiment towards the President will change dramatically. I think the odds are around 75% for such a change for several simplistic reasons. One and foremost, expectations are extremely low and any uptick will be huge incrementally. Second, Trump was elected, a huge feat in its own bearing. Third, he does not care about alienating today’s center of influence. . Fourth and perhaps most importantly, society undergoes a major transition every 40-45 years.
The last major transition commenced with the Great Society programs of the mid 1960’s amplified by the collapse of communism in the early 1990s. Change is the only constant.
If President Trump accomplishes half of his agenda, I reiterate the small cap and value shares will have the same swagger as today’s mega capitalized growth issues, the result of the ending of globalism (and ETFs) which has boosted these shares to what I believe are unsustainable levels.
As noted many times, interest rates are the largest component of valuation formulas. If GDP reaches 3.0% or about double the rate of the last eight years and 33% lower than Trump’s campaign pledges, the result of regulation and tax reform, interest rates will rise to levels that will negatively impact the largest capitalized growth momentum issues. Small and value stocks on the other hand will be positively impacted.
The Treasury market has been crushed the last few days, the result of greater inflationary pressures and confidence growth will continue to accelerate. The S & P 500 has now declined for five consecutive days, partially the result of these higher interest rates. On the other hand, small caps and value shares have outperformed.
Yesterday I wrote today may be regarded as the day the mega capitalized growth issues began their descent into life support because of the formal collapse of globalism. Legendary investor and globalist champion George Soros yesterday echoed similar sentiments relating to sudden and violent death of yesterday’s world order and how such may impact the markets.
Commenting on yesterday’s market action, treasuries recovered about half of their losses closing down about 16/32. Equities did the same, ending the day about 0.35% lower.
What will happen today?
Last night the foreign markets were up. London was up 0.01%, Paris up 0.25%, and Frankfurt up 09%. China was up 1.52%, Japan up 0.34% and Hang Sang down 0.71%.
The Dow should open nominally higher. The 10-year is off 6/32 to yield 2.50%.
