FED Pauses, The 'A' Team Quits - What Does the 'B' Team Look Like?

Stocks spun their wheels again on Wednesday as we waited and waited for the FED mins at 2 pm - The Dow closed up 25 pts, the S&P +3.50, The Nasdaq +12, The Russell FLAT and the Transports +6..... Mkts also assessed the damage to Trump after the two working big business advisory groups -  “Manufacturing Council and the Strategy & Policy Forum” were officially disbanded...or at least that is what he wanted the mkts to believe....in fact - he has seen a mass defection of those CEO's over a difference in opinion of what happened over the weekend and how the administration has  chosen to address it.....And so - they are no more......On the back of this news - the dollar index - DXY weakened and Gold spiked higher.....

Now this does create a bit of an issue for Trump - because he has now lost the 'A' team -  a group of some of the smartest people in the country, people that not only would have helped to shape policy, but also people that would  have helped to manage the expectations and sell the policies.....so who does Trump have as the 'B' team?  Look - while there was a fair amount of skepticism about these working groups anyway - does it really make a difference in the end?  I think it does - as it speaks to Trumps ability or in this case his inability to 'work with the crowd' - his money and real estate holdings will do nothing to soften this blow.....

As expected the FED did nothing new - or that is not really true - they have agreed to begin the tapering process - as expected - in September - but apparently some of the FED officials are now split over the timing of the next rate hike.......'New doubts' -  is how the WSJ puts it.....suggesting that the FED 'could deviate from its plans for a third rate increase this year'. 

The macro data of late has been anything but ROBUST.....and this has led some of the brain trust to consider the idea that soft inflation may force them to reconsider the plan....The key message here was that

 'The recent soft inflation numbers could be a sign that something has fundamentally changed in the economy, leading them to suggest holding off on raising rates again for the time being".   Fundamentally changed?

Do you think?  The US economy is nothing like it was - and that is not necessarily bad, but it is clear that it has fundamentally changed and so the thinking has to change as well.  So it is no wonder stocks  don't seem to know which way to go....... The idea of reform and renewed fiscal stimulus policies that Trump p ran his campaign on appears less and less likely in 2017.....So what are investors to do?  Do they keep pushing prices higher or do they stop and re-think the plan. 

And if - by the way - the economy has fundamentally changed - don't the FED models have to  change as well?  And then that means that investment manager models might be giving the wrong signals - so they may need to change too.   Look - Senate Leader Mitch McConnell - has proven to be impotent -  unable to deliver anything productive to the President's desk  from the Senate - now you must ask - Is this by design or is it just impotence? (He is 75 and that little blue pill only goes so far....)    And in fact with each passing day - the GOP becomes more and more fractured every time Trump opens his mouth.... and now we are only 14 months away from the 2018 midterm elections - watch what happens.    Democrats are surely not going to come to the table and work with the fractured GOP and GOP members of Congress that are up for re-election will surely distance themselves from a President that appears to be going 'off the rails'......so one could argue that we won't get anything in terms of reform or fiscal stimulus at all......and once the mkt realizes this truth - then investors will be 're-thinking' their models as well. 

Now yesterday I commented on the retailers - saying that

'retail earnings (with the exception of a few)  have been disappointing and the retailing ETF - (XRT) tells that story out loud.....The ETF lost 2.5% yesterday  closing at $38.59 and is down 20% since late December 2016 putting it in bear mkt territory...... and the massacre does not appear to be over just yet. The XRT has now broken all key supports and is back at February 2016 lows.....where we should hope it finds support at $38.  If it does not - then we are in for a rougher ride...'.  

 And like clockwork - we got some 'better than expected' reports from TGT and URBN....and our friends at HD - raised their outlook for the balance of the year.....these three names did cause a stir in the retailing ETF - XRT - but nothing to really write home about....Yes, it tried to rally - and then failed, closing on the lows of the day at $38.96...so before you go out and say you picked the bottom....my guess is it will test the lows again and then fail - sending it lower still - but hey - that's me.....

This morning - global mkts are under pressure.....Asian mkts down small - and European mkts are under pressure as ECB President - Uncle Mario Draghi - raised concerns that the Euro may rally more than it should - forcing him to 'gain more policy space and flexibility to adjust policy'.....In addition UK Retail Sales beat estimates -  up 0.5%, while EU Core HICP (Harmonized Index of Core Prices) was also firm at 1.2%.  (The EU HICP is our CPI - Consumer Price Index). 

No news out of NK - as Chubby appears to be still standing in the corner with his dunce cap on.....Eco data today includes Philly Fed exp of 18, Ind Prod exp of 0.3%, Cap Util of 76.7% and Manufacturing Prod of +0.2%.  The usual suspects - Jobless Claims of 240k and Cont Claims of 1.955 mil. 

 US futures are down 6 pts this morning  ahead of the opening bell.....after hitting resistance at the 2470 ish level yesterday.  And while the US is currently dealing with a crisis of leadership - the administration will try to move on.....Remember - Congress is on vacation so - not a lot coming out of Capitol Hill.  Next week is the famed Jackson Hole Central Bank Conference - and while Janet will be one of the central figures - all eyes will be keenly focused on Mario Draghi and what the outlook is for the Eurozone and what policies will look like going into 2018. 

 

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Green Pea Pesto 

The pesto sauce originated in Genoa which is in the Liguria region of Northern Italy.  Liguria borders France, Piedmonte, Emiglia-Romagna and Tuscany.... and sits right on the coast of the Ligurian Sea.   The hills lying immediately beyond the coast coupled with the sea account for a mild climate year-round. Average winter temperatures are 45 to 50 °F and summer temperatures are 73 to 75 °F.  This makes it a very temperate place year round and as such remains quite popular.
 
Portofino lies on the coast just up from the capital of Genoa and is a destination for some of Europe's rich and famous.  Today's recipe makes use of the mortar and pestle - The verb Pestare means to pound or crush - Pesto is the past participle of this verb. - The reference to pounding is because of the way they used to make it in a mortar and pestle -  this is a tool that is used to crush/grind certain ingredients/herbs etc.....Now you can use the mortar and pestle or you can use the food processor - your choice.....and as you now know  Pesto is usually made with garlic, basil, pine nuts, parmegiana cheese and olive oil.....(in other recipes - I substitute - basil for Arugula, Asparagus, or Broccoli and make pesto out of those ingredients)  so today we are going to use Peas.   
 
For this you will need:  Frozen peas, Parmegiana cheese, 2 garlic cloves, splash of lemon juice, a bit of chopped basil, pepper (the cheese is salty enough) and olive oil.  
 
First bring a small saucepan of water to a boil and add the peas...cook until the water reboils +1 min.  Now strain....Blend all of the ingredients - taste - adjust if necessary then set aside. 
 
Now bring a pot of salted water to a rolling boil and add the linguine (you can use any type of pasta you want - but I like linguine with this meal) - cook for 8 / 10 mins or until aldente...strain - reserving a mugful of the pasta water.  Put back in pot and add back 1/4 cup of water to remoisten...stir....no puddle in the pan...capisce?  Now add the pea pesto and toss.  Serve immediately in warmed bowls. Always have extra grated cheese on the table for your guests.  Again - this is a simple meal and easy to prepare. Enjoy it for what it is - comfort food.....
 

  
Buon Appetito.