By: Kent Engelke | Capitol Securities
Today is not different, there are just different people defined as history typically repeats itself.
Digressing considerably, the other night I was watching a documentary about Winston Churchill and the week centered on the Dunkirk disaster. He was elected in a bitter election several weeks before the “low water mark of the British Empire.” The Establishment was steeped in appeasement, an Establishment led by Lord Fairfax and Neville Chamberlin.
For those who may not recall, Neville Chamberlin was the British PM who said, “We have won peace for our time,” several months before the commencement of the greatest war that ever occurred that claimed between 85 and 100 million lives. Lord Fairfax was an extremely powerful and influential aristocratic politician that also championed appeasement, seeking peace with Germany.
In my view, the similarities, both politically and personality, between Churchill and President Trump are/were uncanny. Churchill challenged the Establishment, a challenge that almost failed miserably. Today most historians believe he is a major factor why England did not fall to the Germans.
Donald Trump is challenging the Establishment. He is reviled by both the left and the right. Comments made and attitudes about Trump are similar to those made about Churchill. Similar to Churchill, Trump is/was rallying the masses in believing that tomorrow will be better.
Many times I have commented about consumer and business sentiment surveys; surveys that have surged since November 2016 and in many regards are at the highest levels in over 30 years. Talk about Hope and Change.
Politics and economics are blood sports. The Establishment does not like change for a myriad of reasons, most specifically, all know the rules and respond politically and financially accordingly.
As I commented the other day, I do not know if there is free trade. What I do know is that the rules are changing, rules that the Establishment has spent billions in crafting
Speaking of change, the other day I referenced a JP Morgan report stating the impact of AI (algorithmic trading) had upon the markets during February’s swoon. Yesterday, Bloomberg referenced the losses in a $52 billion quantitative (algorithmic) hedge fund, the greatest since 2008, losses that are considerably greater than losses sustained in the S & P 500.
The co-founder of the fund states, “We have made easy money for a long time; that cannot go forever and I think we are in period of adjustment….it is hard to say how this unfolds given the similarities of and proliferation of these types of funds.”
Many times I have opined when everyone adopts a similar trading strategy, that days of that strategy are numbered. Are we there today?
Commenting about yesterday’s market action, equities were again lower. Some believe the decline was the result of politics. Others point to disappointing retail sales or concerns about monetary policy. While some suggest market mechanics are now completely broken where the popular cross-correlated trade is dead.
I think it is a combination of the above.
Perhaps the only certainty to write is today is considerably different than yesterday; a change that should have been expected given nothing lasts to infinity.
What will happen today?
Last night the foreign markets were up. London was up 0.07%, Paris was up 0.14% and Frankfurt was up 0.12%. China was down 0.01%, Japan was up 0.12% and Hang Sang was up 0.34%.
The Dow should open flat. The 10-year is unchanged at 2.82%.