My Article on Zocalo: "The U.S. Can no Longer Remain an Island of Economic Tranquility"

http://www.zocalopublicsquare.org/2016/04/20/the-u-s-can-no-longer-remain-an-island-of-economic-tranquility/ideas/nexus/

How’s the economy?

We have so many indicators to measure, you’d think the answer to that question would be as straightforward as the answer to the question of “How’s the weather?”

It never is, of course, for a number of reasons. The “economy” in the aggregate covers many activities and sectors, some of which can be booming while others are in a rough patch. Similarly, some individuals suffer economic hardship in supposedly good times, while some people manage to thrive in down times, so one’s feelings about “the economy” don’t always correlate with the latest macro statistics and headlines.

But there is a more novel reason for the confusion surrounding how people feel about the economy: the perceived seesaw relationship between the U.S. economy and the rest of the world. For the past decade, our fortunes and those of nations beyond our shores haven’t been moving in tandem. Even more worrisome, in the political realm the two are increasingly described as being in a zero-sum, adversarial relationship.

Go to URL above for the full article.

America Turns Inward

If we didn't need any more evidence the results of yesterday's primaries indicate that the American electorate is turning inward. The rise of Trump and Sanders proves that there is a strong anti-free trade consensus. Although Sanders and Trump voters vote with their pocketbooks in favor of free trade every day at Wal*Mart, at the ballot box they resoundingly vote against it. These facts will be confirmed when the Trans Pacific trade deals goes down to defeat, if it is ever voted on.

Moreover with Trump appearing to be a direct descendant of the isolationist America First movement of the early 1940s and with Sanders firmly believing in the American retreat of his socialist roots, the world will soon become a more dangerous place. We have written many times before that we are in the process of reliving the 1930s and unfortunately the evidence grows with each passing day. We are getting pretty close to gangs of Trump and Sanders supporters fighting it out in the street. Simply put, the political situation is getting very ugly. Soon the markets will reflect it.

Barron's Joins Shulmaven on Trump-Sanders Risk to the Stock Market

Barron's arrived this morning with a lead story on the impact of Trump and Sanders on the stock market. See: http://www.barrons.com/articles/trump-and-sanders-are-they-killing-the-stock-market-1455341656?mod=BOL_hp_highlight_1?mod=BOL_hp_highlight_1 (Paywall) It is nice to see the financial press waking up to what has been in front of them for the past six weeks. 

See the recent Shulmaven on this issue: http://shulmaven.blogspot.com/2016/02/the-trump-sanders-market.html

Meantime I fear that despite Friday's strong rally, the course for stock prices over the near term will continue to be volatile as it follows the ups and downs of the political campaign. The one bright spot is that the economic news remains good with a decline in unemployment claims and a rebound in retail sales.

The Trump-Sanders Market

Stocks broke to new closing lows today with the S&P 500 down 1.2%. CNBC mentioned five reasons for the decline:
1.Central banks out of bullets.
2. Continued drop in oil prices.
3.China worries.
4. Global recession fears.
5. An emerging European banking crisis.

Amidst the decline in  share prices treasury bonds rallied strongly, but gold soared with a $56 advance and the dollar actually declined against the Euro. If the five reasons mentioned were the only causes then we would not have expected gold to rally and the dollar to decline. There is something else going on.

Simply put CNBC left out the big elephant in the room, the forthcoming presidential election whose primary contenders are Donald Trump and Bernie Sanders. If market participants didn't believe this was so, this week's New Hampshire Primary certainly disabused them of that notion. Both of these candidates have one thing in common; they want to blow-up the global trading system. They may or may not realize it, but they are playing with the fire that the stuff global depressions are made of. Thus the market is beginning to price in the very real political risk facing the U.S. stock market.

For my prior comment on Trump and the stock market see:

 http://shulmaven.blogspot.com/2016/01/trump-and-stock-market-connect-dots.html

Giving Opportunism a Bad Name: Hillary and TPP

Hillary Clinton came out against the Trans Pacific Partnership (TPP)  trade agreement today. After publicly supporting it over 30 times as President Obama's secretary of state, she has succumbed to the hot breath of protectionism now emanating from the left wing of the Democratic Party and it new exemplar, Bernie Sanders. Simply put, she is giving opportunism a bad name.

Now with much of the Republican Party under the spell of the protectionist Donald Trump, the chances of Congress approving the TPP next year are slim and none. The situation is further complicated by John Bohner's departure from the House leaving the Republican rookies in charge. It was a tough sell to give Obama "fast-track" authority earlier this year; it will be a far tougher sell next year.

Meantime in a world that is growing more chaotic by the day, this is not good news for the United States and it is certainly not good news for the global stock markets.