Is Team Trump Up to the Challenges That Are Mounting?
"North Korea launched yet another intermediate-range ballistic missile. The United States has spoken enough about North Korea. We have no further comment."
--Rex Tillerson, Secretary of State
Yesterday the Quinnipiac Poll indicated that President Trump's approval rating has dropped to 35%; that's worse than almost every prior presidential approval rating and rivals President Bush's low print when we were moving into The Great Recession. (Other polls have had similar outcomes -- for example, The IBD/TIPP poll on Monday.)
The absence of any legislative victories to date coupled with the poll results make it difficult for the president to enact policy and difficult for his own constituency, Republican congressional members, to support the president. We already have seen the schism and gridlock in the health care vote, in which the Freedom Caucus failed to support the administration's efforts.
Putting the Hand on a Hot Stove
Strangely, for the second consecutive day, Vice President Pence continues to try to orchestrate another attempt to resurrect a health care proposal with disparate factions in the House. This action is bewildering after the political capital that was lost in the initial health care vote. Most agree that the president should move on to tax, regulatory and infrastructure policy now.
Further deterioration in support for the president in our country also will create a challenge for the administration in foreign policy, as it reduces the willingness of non-U.S. powers to cooperate with us in a fragile and interconnected world.
I continue to see a pushback of the new administration's tax, regulatory and infrastructure initiatives, the presumed success of which has guided our equity markets higher since early November.
As mentioned in my opening missive on bonds yesterday, the fixed-income markets, where the 10-year U.S. note yields 2.36%, have delivered a thumbs down to the "hockey stick" progression in economic and profit growth that the bulls expect.
Though yesterday was another day of rallying from the weakness in the morning, the market's character seems to be changing. Breadth is deteriorating as are the number of new highs. (See Rev Shark's opener this morning.)
Meanwhile, Syria, where that country's air force is supported by Russian planes and is dropping toxic material on civilians, and North Korea, with its expanding military arsenal, pose ever-present issues and threats that must addressed under the Trump watch. Thus far, instead of issuing foreign policy directives and leading us in potential crises by taking strong and aggressive action, the president has criticized his predecessor. I recognize that there is no perfect answer, that there is complexity to the responses of the U.S. and world community to acts of aggression. However, this is an opportunity, if the president elects, to do things differently. But pointing a finger via tweets at former President Obama, whose Syrian policy was ineffective, doesn't cut the mustard with many.
Stated simply, it is now President Trump's watch. Solutions, as complex as they might be, must be delivered now.
The Answers to My Seven Questions Remain of Concern
For the last year or more I have been preoccupied and concerned with the answers to three simple questions:
* In a paperless and cloudy world, are investors and citizens as safe as the markets assume we are?
* In a flat, networked and interconnected world, is it even possible for America to be an "oasis of prosperity" and a driver or engine of global economic growth?
* With the G-8's geopolitical coordination at an all-time low, how slow and inept will the reaction be if the wheels do come off?
Recently I added four additional questions to the three above, the answers to which concern me as an investor:
* Remember when the big argument in favor of President Trump was that he was a dealmaker who knew how to get things done? That was when he was doing real estate deals. Now he has to deal with 535 other politically partisan legislators in Congress on their own real estate turf.
* Does the administration have the depth of experience, understand the extent of the legwork and organization required for passing legislation or have a coherent idea or shared vision of what it wants to achieve and what problems it means to solve?
* If President Trump can't easily put through a health-care package, what does that mean for more difficult regulatory reforms and his tax- and fiscal-policy agenda?
* President Trump took credit for the stock market's advance since his election victory. Will he take responsibility for Tuesday's correction, and possibly a further correction? Is it a slippery slope for an administration to use the S&P 500 as a barometer of success? And is a pro-business and anti-domestic programs (in education, the arts, etc.) agenda going to benefit those in the lower and middle class (largely his base) who have suffered the most over the last decade?
Instead of attacking the intelligence community, alienating and attacking President Obama, warring with the press, fighting with Republicans on the Hill who refuse to give the president everything he wants and condemning the Democratic opposition --generally staying at war with everyone -- it is time in line with his promises during his campaign for Mr. Trump to change things, shake things up and make lives better for Americans.
Does anyone believe, given the above, that President Trump can get the Chinese to stop North Korea's military expansion?
To me, the current tests in North Korea and around the globe will continue.
It is hard for many to yet see clear domestic and foreign policies from the White House -- no overriding doctrine, strategy and framework are emerging to guide us forward.
And, to many, daily White House photo ops don't pass the test.
Governing is not as easy as we see on television. The president needs to develop the personal discipline and team to more appropriately understand the complexity and challenges of the issues our country faces.
If not, the markets will grow impatient -- post-haste!
As an aside, tomorrow night I will be having dinner at Mar-a-Lago. I will attempt to send pictures on Friday morning!
P.S. A continued qualifier: My column is not intended as a political statement. It is my view of the administration and my judgment on the president's ability to move forward on legislation and how this will impact our markets.