What to Worry About Today: the Year Ahead

Outlook:

Right off the bat, we need to point out that both currencies and equities are counting on the US-China trade deal to be a Real Thing. Having observed Trump’s erratic behavior for several years now, we say confidence in this outcome is at odds with any sensible reality-check. The deal can get scuppered in a moment if Trump needs a grievance with which to distract the public from his impeachment. Judging from the rising number of intemperate tweets, he is fairly unhinged by the damage of impeachment to his “legacy.”

The calendar this week is pretty skinny. We get final PMIs for some countries and in the US, the ISM manufacturing index. Nobody is fainting, but remember that the ISM manufacturing index is still under the boom-bust line of 50—unlike the Markit version--and likely to remain there. Even if it nudges up a bit, under 50 is still not good. Tradingeconomics.com reported at the last release that the index “edged down to 48.1 in November of 2019 from 48.3 in October, well below market expectations of 49.2. The reading pointed to the fourth straight month of declining manufacturing activity, amid a steeper decline in new orders and employment. Global trade remains the most significant cross-industry issue.” See the chart. This is not a robust sector. An improvement might be dollar-favorable, but it’s still bad news.

Most of the time, we have to say that the US president, whoever he is, doesn’t deserve credit or blame for the performance of the economy and stock market. This time we would have to put some blame on Trump for the falling ISM manufacturing index when “Global trade remains the most significant cross-industry issue.” Might we escape worse outcomes now that Phase One is done? Dream on. But until Trump invents a new trade crisis, perhaps out of the same cloth, sentiment toward the dollar is increasingly negative.

Politics: We eschewed cable TV news for a full week and watched old Australian TV shows on Amazon Prime instead. They are very good and blessedly free of zoom-zoom and bang-bang, if not smooch-smooch. What leaked through was more deplorable conduct from the White House, including disclosure of the whistleblower’s name, a military kickback against the Trump pardon of a misbehaving Seal, and hundreds of stupid tweets against Speaker Pelosi, who is withholding the articles of impeachment until the prospect of sham trail is less glaring.

The Dems need only four Republicans to get a vote requiring witnesses and documents, with plenty of old TV footage showing some of them demanding witnesses in the Clinton impeachment, including Lindsey Graham and Susan Collins. The problem is that the public knows politicians are hypocrites and the politicians know the public knows--and may not care. This means that while the politicians have to heed public opinion, and everyone knows it was changing public opinion behind the Nixon decision, polls may turn out unreliable—again. The latest poll is from the Economist/YouGov and published on Christmas Day. It shows 49% approve impeachment and.

This is an excerpt from “The Rockefeller Morning Briefing,” which is far larger (about 10 pages). The Briefing has been published every day for over 25 years and represents experienced analysis and insight. The report offers deep background and is not intended to guide FX trading. Rockefeller produces other reports (in spot and futures) for trading purposes.

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