• Get 30-Days Free → “The Macro Show” With CEO Keith McCullough

    Turn off the CNBC nonsense. Proactively prepare your portfolio. Get 30-days free access to The Macro Show —no credit card, no strings attached. The smartest market TV available.

  JT TAYLOR: CAPITAL BRIEF - JT   Potomac banner 2

FREE AT LAST: Speaker Paul Ryan has made it known for months now that the job was taking a toll on his family and his announcement came as a surprise mainly to his most stalwart supporters back in Janesville, Wisconsin as speculation in Washington of his retirement has been off the charts for the past few weeks – even months.  Washington insiders were shocked by Ryan’s timing only because it is atypical of most politicians to depart on honorable terms without a political calculus.  The jockeying to replace Ryan might be short-lived depending on how quickly Majority Leader Kevin McCarthy (and whether or not Ryan endorses him) can mobilize support within the House. McCarthy failed in his in attempt to claim the gavel years ago and House Majority Whip Steve Scalise is primed to fill the void should stumble again.

While Ryan wants to leave on his own terms, an anxious and restive House Republican Conference may not be as willing. With an increasingly challenging midterm environment ahead of them as well as the need to shepherd the remaining remnants of their legislative agenda, talk of replacing Ryan and calling for leadership elections quickly permeated the halls of Congress yesterday.  If House Republicans pursue this route, again, political machinations in the House would favor McCarthy.  The bloc to watch in the coming weeks - and again in late November - will be the ultra-conservative Freedom Caucus.

With 41 announced retirements, nothing will be fully locked up or decided until Congress returns weeks after the midterm elections with dozens of newly-elected Members of Congress descending upon Washington.  And we won’t know until the morning after election day on November 6 whether the Republican race will be for Speaker or Minority Leader.  Speaking of retirements, the 41st came just as Ryan was making his announcement around 10am yesterday by Rep Dennis Ross (R-FL).  We’ve said before that we won’t be surprised to see that number top 50 with 28 of those currently on the Republican side of the aisle.

DODD-FRANK IMPASSE: In testimony before the House Financial Services Committee, Mick Mulvaney, acting director of the CFPB, said he thinks the House Republican's efforts to amend the Senate's Dodd-Frank regulatory overhaul are "the best formula for arriving to the best result." Mulvaney served on the Committee until his nomination by President Trump to the post of director of the OMB, a position he still holds concurrently with his role at the CFPB.  Speaker Paul Ryan chimed in with his intent to rollback Dodd-Frank when ticking off a number of items he wants to prioritize before stepping down later this year. Ryan has endorsed the House Republican strategy to expand on the Senate bill and then negotiate a final measure with the Senate – but Senate Democrats, who already took a lot of heat from their allies given their critical votes to pass the original bill, have no desire to revisit that chapter again.  Period.

DON’T FORGET ABOUT 232: U.S. companies are looking at a protracted and expensive process when applying for exclusions from the Section 232 steel and aluminum tariffs. Below are the procedures to obtain tariff relief as outlined by the U.S. Department of Commerce:

JT TAYLOR: CAPITAL BRIEF - tariffs waivers

USA #PEAK CYCLE? This year marks the 10th consecutive year we have been publishing our Quarterly Macro Themes. These are the three top-down catalysts our models suggest are increasingly likely to drive investment returns going forward and that our proprietary sentiment indicators suggest investors are not yet broadly positioned for. Here’s one. After 6 consecutive quarters of accelerating growth and bullish quantitative signaling, our model is mapping a peak and prospective negative inflection in domestic economic growth as we move into 2H18. There's been a shift in market and macro dynamics recently. The fundamentals, base effects and other risk management dynamics are driving our expectation for a downshift to investment regimes we call Quad 3 (Growth slowing, Inflation accelerating) and Quad 4 (Growth and Inflation slowing) in the back half of the year. Below are our GDP estimates. Wall Street consensus GDP estimates are now above Hedgeye forecasts for the remainder of 2018. We think consensus isn't properly positioned for these emergent phase transitions in growth and volatility.