Good Morning,
U.S. equities closed mixed on Friday after the initial fourth-quarter GDP read fell short of estimates, but managed to record weekly gains of around 1 percent.
Economic growth in the U.S. slowed more than expected (slowest since 2011) in the fourth quarter as a plunge in shipments of soybeans weighed on exports, but steady consumer spending and rising business investment suggested the economy would continue to expand.
Gross domestic product increased at a 1.9 percent annual rate, the Commerce Department said on Friday in its first estimate of fourth-quarter GDP. That was a sharp deceleration from the 3.5 percent growth pace logged in the third quarter.
Our Take
The GDP confirms what we already knew. The U.S. economy is stuck in this growth range with the year ending on a mediocre note, but policy is already changing with Trump's actions strongly indicating that he is moving to deliver on many of the biggest and most revolutionary pledges of his campaign,
Lets have a look at what Trump did during his first (whirlwind) week in office:
1) Affordable Care Act rollback
One of Trump's first acts as president was to sign an executive order aimed at rolling back Obamacare. The order directs agencies to "waive, defer, grant exemptions from or delay implementation of any provision or requirement" of Obamacare that imposes a burden "to the maximum extent permitted by law," and to offer the states as much flexibility as possible in implementing healthcare programs.
2) Immigration
Trump made the biggest splash of his first week in office on Wednesday, when he signed two executive orders codifying two of his major campaign pledges: To build a wall at the southern border and to cut federal funding to "sanctuary" cities, which don't enforce federal immigration laws on undocumented immigrants.
On Friday he also put a four-month hold on allowing refugees into the United States and temporarily barred travelers from Syria and six other Muslim-majority countries, saying the moves would help protect Americans from terrorist attacks.
3) Supreme Court
Trump announced — via tweet — on Wednesday that he would reveal his pick for Supreme Court Justice during his second week in office, on Thursday.
4) Reducing regulations
The Trump Administration has issued two memoranda dealing with regulations so far, taking steps to fulfill the longtime Republican Party pledge to rollback burdensome regulations on small businesses and manufacturing.
Shortly after Trump was sworn in, White House Chief of Staff Reince Priebus issued a memorandum instructing all executive departments and agencies to freeze new or pending regulations. This is a largely standard move for a White House transition to a new party, and is meant to give the incoming administration time to review any new regulations — or halt the implementation of some policies enacted by the previous administration.
5) Expediting infrastructure projects
In a similar vein, Trump issued an order Tuesday declaring the administration's intent to "streamline and expedite … environmental reviews and approvals for all infrastructure projects," particularly those deemed as "high priority" for the country — like updating the nation's electric grid or critical bridges and highways.
6) Abortion
On Monday, Trump's third full day in office, he signed an executive order reinstating the "Mexico City Policy," first implemented under Republican President Ronald Reagan in 1984. It bars taxpayer dollars from being used to fund non-governmental organizations "providing counseling or referrals for abortion or advocating for access to abortion services in their country."
The move won plaudits from anti-abortion rights groups, but was largely unsurprising — while every Democratic president since Reagan has reversed the measure, every Republican president has reinstated it.
7) Voting Rights
During a meeting with Congressional leadership Monday night, Trump again repeated his debunked claim that 3 to 5 million votes were cast illegally, robbing him of an election win. After repeated questions from the media, he on Wednesday announced plans to do something about it.
8) Withdrawing from TPP
Trump made good on one of his major campaign promises Monday when he signed an order withdrawing the U.S. from the Trans-Pacific Partnership Trade Agreement negotiations. It directs the U.S. Trade Representative to instead "begin pursuing, wherever possible, bilateral trade negotiations to promote American industry, protect American workers, and raise American wages."
The order is largely symbolic, as the trade agreement hadn't been signed by the U.S. and was unlikely to be approved by Congress as it faced opposition from members of both parties. But it formalizes U.S. withdrawal from the agreement, essentially erasing it.
9) Federal hiring freeze
On Monday, Trump signed a memorandum telling agencies they can't fill vacant positions or create any new ones — excepting military personnel and critical public safety positions — and directing the Office of Management and Budget to formulate a plan to "reduce the size of the Federal Government's workforce through attrition."
10) Energy production
On Tuesday, Trump signed orders clearing roadblocks for two controversial oil pipelines: The Dakota Access pipeline, which would carry oil from North Dakota, through South Dakota and Iowa to be shipped out of Illinois, and the Keystone XL pipeline, which would bring oil from Canada to Nebraska.
What does it mean?
Without getting into the merits/demerits of his social/cultural policies Trump may be moving too fast. Interesting article this week in Bloomberg by Margaret Carlson suggesting that the whirling dervish occupying the Oval Office knows the body politic is not designed to absorb so many actions taken so fast with so little thought.
She writes that: "Not Capitol Hill, not the press, not the new president’s critics or friends. And not, it would seem, President Enrique Pena Nieto of Mexico, who cancelled a much ballyhooed one-on-one with Trump that was supposed to be the opportunity to work out a payment plan for the wall along the border. That’s what happens when you can’t wait until you have a secretary of state. If there’s one message coming out of the Republican retreat in Philadelphia where Trump spoke Thursday afternoon, it’s slow down, you’re moving too fast."
What concerns me most from an economic point of view is the proposed border wall and the idea to use a 20% tax on all Mexican imports to fund it. This measure would likely inflict economic damage on both sides of the border.
About 40 percent of the content of Mexican exports to its northern neighbor actually originate in the U.S., according to a 2010 National Bureau of Economic Research working paper.
And roughly 5 million American jobs depend on trade with Mexico, according to Christopher Wilson of the Mexico Institute at the Woodrow Wilson International Center for Scholars.
Furthermore, prices in the USA for consumer goods would surely rise further pinching the pockets of the "forgotten man and woman" who shop at Wal-Mart....
Musings
This week my social media/news feeds have been exploding with anger over the above list of changes/ There is no doubt that these are contentious issues with arguments for and against on either side but what is most concerning to me is the unwillingness of many to consider opposing viewpoints.
We appear to have lost our ability to listen, consider and reason with those who hold opposing viewpoints. This is problematic as one of the hallmarks of a liberal democracy is debate. Where do we head as a society if no one is willing to sit down, face the facts and make an effort to consider (from the other's point of view) an idea that one does not espouse?
Are we living in an age of contempt in which we deligitimize facts and opinions? Forget a "post truth" world. We may have moved to a "post-intelligence" world....
Thought of the Week
"The test of a first rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function. F. Scott Fitzgerald, "The Crack-Up", Esquire Magazine (February 1936).
Stories and Ideas of Interest
The stock market doesn’t really care who’s US president. The commander-in-chief has very little to do with the economy’s performance. Great piece from Ben Carlson who looks at historic data on stock market performance.
Stock market participation is still quite low. The Dow hit 20,000 and half of America missed out. Back in April 2016, Gallup conducted its latest annual poll showing that just 52% of American adults owned stocks, via either individual issues, mutual funds, or self-directed 401(k) plans. This matched the lowest ownership level in Gallup’s 19-year tracking of this measure.
Warren Buffett says the US will do fine under Trump because we've got the 'secret sauce. "America works," the chairman and CEO of Berkshire Hathaway said. "I've said this before. It'll work wonderfully under Hillary Clinton, and I think it'll work fine under Donald Trump."
- The super rich are preparing for the end of the world. Some think the end is near. “You just need so many things to actually ride out the apocalypse,” says former Facebook product manager Antonio García Martínez.
- Why the elites will always rule. Not exactly a politically correct title but this piece is a must read for anyone trying to make sense of our world and the power structures that have proliferated. History is the story of one elite replacing the other whether fox or lion. This is a very compelling account that transcends left and right, Republican and Democrat.
All the best for a productive week,
Logos LP
