“Defeat doesn’t finish a man, quit does. A man is not finished when he’s defeated. He’s finished when he quits.”
-Richard Nixon
Former President Richard Nixon’s quote above about quitting ended up being prophetic. He was, indeed, finished when 43 years ago today he quit as President. His Vice President Gerald Ford was sworn in as President and Nixon flew off into the sunset.
In watching the Presidency of Donald J Trump since his inauguration, it doesn’t take much to realize that this man, love him or hate him, is not going to quit. This man is many things, but a quitter he is not. When dawn is darkest, literally, he will take the fight to his perceived enemies via early morning Twitter warfare.
It took only eight short days after his inauguration for Trump to dip below 50% in the approval ratings based on Gallup’s polls. Currently his approval ratings based on the Real Clear Politics average sits at the lowest of his Presidency. According to this aggregate, only 37.7% approve of the job Trump is doing and 57.2% disapprove of the job he is doing.
The latest odds from Ladbrokes have Trump’s impeachment or resignation odds at 11/10 (48%) before finishing his first term. The same bookmakers have the odds of Trump serving a full term at 8/11, or 58%. Given that it would take a majority in the House and two-thirds majority in the Senate to impeach Trump, and both Houses are Republican controlled, these odds makers are truly assuming the worst.
The economy and stock market are telling a very different tale. To cite a few examples:
- Median home prices are up 6.5% year-over-year in June;
- U.S. unemployment is at 4.3%, a 16-year low, and the economy has added 1 million jobs since Trump took office;
- Business and consumer lending is up; and
- Last but not least, the stock market is on an absolute tear. Anyone who bet negatively on stocks because of Trump has been taken out behind the woodshed this year.
Now certainly, there are negatives related to the economy, but it’s hard to dispute that there are many, many more positives at the moment. Are these because of Trump or despite Trump? That is a difficult question to answer. But with a Trump resignation or impeachment getting closer to being priced into the market, the next big political catalyst may be when that cloud is removed...
Back to the Global Macro Grind…
In the spirit of not quitting, we received more positive data this morning on the U.S. housing market. The MBA Mortgage application index was up +0.8% week-over-week and the total index was up +3.0%. The refi index came in even stronger at +5.3%.
In their most recent market update, the Hedgeye Housing team led by Josh Steiner highlighted a very interesting point about the current housing market related to first time buyers, specifically:
|
Bear in mind that beneath the underwhelming headline growth is an ongoing, positive mix shift that continues to support a slow march to housing market normalization. As the NAR rightly notes in this morning’s release: “Sales to investors last month were the lowest of the year (13 percent), which helped push all cash transactions to 18 percent – the smallest share since June 2009 (13 percent).” In other words, the rise in 1st time buyer activity and conventional purchases continues to (more than) offset the retreat in investor activity and distressed sales. |
So, finally, the first time buyer is back! (Whether this means Millennials will start having kids again and moving out of their parents’ basements is a topic for another day.)
In other economic news this morning, U.S. Q2 productivity clocked in at +0.9% versus the consensus estimate of +0.6%. On the “cost” side, Q2 unit labor costs actually came in lower than consensus at +0.6% versus a consensus of +0.9%. So productivity better than expected and unit labor costs worse, seems supportive of our call of a #Quad1 (growth up, inflation down) transition for the U.S. economy.
Since we are talking housing and history this morning, we would be remiss if we didn’t mention that it was exactly ten years ago today that BNP Paribas froze three investment funds because of “a lack of trading in subprime securities made valuing them impossible.”
Luckily, the U.S. regulators seemed to have learned a little about mortgage underwriting standards and the underlying health of this housing market is more realistic. That is not so for all regions of the world though, specifically Australia and Canada. Policy makers in those countries would be wise to consider a great quote from Mark Twain:
“History doesn’t repeat itself but it often rhymes.”
If you’d like to get our institutional research on the global housing markets, please ping .
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:
UST 10yr Yield 2.21-2.33% (neutral)
SPX 2 (bullish)
RUT 1 (bullish)
NASDAQ 6 (bullish)
EUR/USD 1.16-1.19 (neutral)
GBP/USD 1.29-1.32 (bullish)
Oil (WTI) 46.77-50.23 (bearish)
Gold 1 (bullish)
Keep your head up and stick on the ice,
Daryl G. Jones
Director of Research
