Trump Twist Gift to the WhatsApp Broadcast Group
Trump tweeted that stimulus talks were off on Tuesday in a surprise move. This has been a long, confusing tale that highlights the difficulty in trading around politics. A deal appeared to be completely dead three weeks ago but was then resurrected and appeared to be making steady progress.
Ultimately there was no deal to be made with the gap between Republicans at $1.5T and Democrats at $2.2T too tough to breach. No doubt that liability protection and how that money was spent was also a big factor.
While many market-watchers were pointing to Trump's health as the reason for market moves Monday, we stringently disagreed. The reversal in those moves on this (as Trump continues to heal) bears that out. The S&P 500 gave up all its gains for the week and Treasury yields gave back most of Monday's rise. In FX, commodity currencies and EM were hit hardest.
Under any scenario, the decision by Trump is bizarre. A recent Times/Siena national poll showed voters overwhelmingly supported a new $2 trillion dollar stimulus package by a 72-23% margin. It's even worse to take ownership of talks breaking down by being the party to walk away from the table.
With that, the odds of a Democratic sweep on Nov 3 rise. If that happens, it's going to lead to a reversal in today's moves but it's tough to envision markets pricing it in now because it hinges on 2-3 senate seats flipping and those could be held even if Trump stumbles to the finish line. So the trade for now is probably more money in search of safety.One risk is that Trump's stimulus tweet was some kind of negotiating ploy or that he backtracks in the day ahead. With this President, we're always just another tweet away from a complete reversal.
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