Liberty, when it begins to take root, is a plant of rapid growth.
-George Washington
TRUMP DE FORCE: Following Bashar al-Assad’s use of chemical weapons on rebel forces in Syria, the U.S. launched a missile strike on the Shayrat Airfield - the site where the chemical attack was launched. President Trump, who had recently called out former President Obama for not doing anything about Syrian use of chemical weapons, wasted no time in authorizing the use of force and dramatically escalating U.S. involvement in the Syrian conflict and drawing the U.S. into a face off with Russia. Trump’s move was supported by many (not all) of his critics and supporters on Capitol Hill as well as critical allies in Europe and the Gulf States. Trump’s intervention also raises the stakes for Secretary of State Rex Tillerson’s trip to Moscow next week and is likely to reignite the debate on the Hill about the use of military force and whether the president can use it without the approval of Congress.
CHINA SYNDROME: While President Trump and Chinese President Xi Jinping aren’t expected to make any significant resolutions during their first meeting, it will give Trump his first opportunity to turn his campaign rhetoric into results. During the campaign Trump claimed China was using the U.S. as a piggy bank, and he now has the opportunity to try and reign in China’s unfair trade practices - and the key to these meetings will be an attempt to crackdown on those trade policies without triggering a broader trade war - in addition to confronting the burgeoning threat in North Korea.
PARTING GIFT: As Congress heads home for the Easter recess, Speaker Paul Ryan is trying to hand Republicans lawmakers a small bit of ammunition. House leadership arranged for a procedural hearing on a narrow health-care provision that creates risk sharing pools. This would help pay for insurance for people with serious illnesses. Although this is a baby step, it shows some movement by Republicans on healthcare as House members raced home last night to face their constituents.
THE SHOW MUST GO ON: The relationship between House Intelligence Committee Chairman Devin Nunes and the Trump Administration has caused a massive distraction over the past few weeks overshadowing any progress the White House has made. Now Nunes has stepped aside in his role of leading the investigation into Russia’s involvement in the 2016 election quieting this storm for the moment and releasing more oxygen into the president’s agenda. Trump now has Washington to himself with the legislative branch vacating the city for two weeks following a vote today in the Senate confirming Neil Gorsuch to the Supreme Court.
A U.S. GROWTH ACCELERATING SIGNAL?: Stock market bears are talking about the recent flattening yield curve (the 10-year Treasury yield minus the 2-year Treasury yield) as evidence that U.S. growth is slowing. Is this true? A flatter yield curve generally signals growth is slowing as investors flee risky equities and seek shelter in safer bonds. A steeper yield curve portends accelerating U.S. economic growth, as investors sell safe bonds and buy stocks. You be the judge. Right now the 10s/2s spread is at +110 basis points wide versus a quarterly average of 98 basis points and 84 basis points in the second and third quarter of 2016 respectively. "Doesn’t it make sense that the curve has steepened, every quarter, since US growth bottomed in the second quarter of 2016," writes Hedgeye CEO Keith McCullough. If we’re right on U.S. growth a steepening of the yield curve has just begun.
