Nobody can make a forecast of any lasting worth when Trump can rear at any moment

Outlook

Europe didn’t need a bazooka or capital controls—Trump retreated all on his own with the lamest of lies. The retreat is more shocking than anyone expected, and very few expected any retreat at all. We all got snookered, again. We can’t learn anything from this mistake because the guy is irrational and erratic. As we wrote at the beginning of his first term and again this time, he will do it again. 

We got snookered again by Trump’s threats. To those who say we should have known better and TACO was always going to be the outcome, consider that he really did bomb Iran (when Bibi told him to) and really did kidnap the president of Venezuela.

So, Trump is erratic and inconsistent. He is also a liar. His internal struggle is between cowardice and narcissism. US hegemony is getting reduced by the day. Former  Bridgewater chief Dalio says we must expect more diversification from the Dollar. Well, no kidding, Sherlock

Economic data barely has a chance to influence markets when we have a loony in the White House who throws norms, values and the law out the window. Still, we have to go through the motions of evaluating inflation, with the upcoming PCE at odds with the CPI and both at odds with popular perception and the verdict of top economists.

Core PCE was last at 2.8% and this is the forecast for today. The Fed actually targets headline PCE, not core, but never mind. It’s closer to 3% than to the target 2% and we cannot expect any action at the upcoming Jan meeting.

Forecast

We don’t know and may never know what scared Trump out of taking over Greenland. We may get bigger and better bases plus access to the minerals, but apparently the whole thing was a thundering bluff that somehow got called, and Trump folded. He will now turn his attention to other real estate, probably Cuba. Markets don’t care about this kind of thing unless the economic and financial consequences are huge. Not to be rude, but frankly, Cuba doesn’t make that grade.

Trump made a complete fool of himself at Davos. He needs to do something else Big to take attention away from his embarrassment. Some say the series of outrageous shocks is still just a distraction from Epstein (full disclosure now over a month late) He’s still in Davos today. If he tries another stunt, it will be in competition with the PCE data.

We still have a seesaw between yields/the dollar vs. the loss of respect for the US and all its asset markets. Nobody can make a forecast of any lasting worth when Trump can rear his ugly head at any moment.

Food for thought: We won’t know for several weeks, but judging from the skepticism obvious in questions asked by the Supreme Court justices, Fed Gov Cook may be keeping her job. We find it funny that the Trump lawyers didn’t bother to include the purportedly fraudulent mortgage application in the case papers. This is another loss for Trump, although the case could be sent back to the lower court on the due process basis. If that is the outcome, it means the Supreme Court has lost whatever is left of its spine.