What to care about

Posted by: Paul Donovan

05 Feb 2020
  • US President Trump delivered the State of the Union address yesterday. Markets do not care. US President Trump is expected to be acquitted of impeachment charges today. Markets do not care. The US Democrats may (possibly) deliver their Iowa caucus results. Markets care a little bit. There are some service sector sentiment opinion polls out today. Markets should not care, but probably will.
  • When there are big news stories (not to mention fake news stories on social media), people's sentiment tends to be influenced by the sensationalism of the story, not the boring reality. Markets still react to the sentiment.
  • ECB Chief Economist Lane is to speak. The words of a chief economist should always be treated with reverence. The ECB is conducting a policy review, and ECB President Lagarde (a lawyer, not an economist) is less likely to provide leadership on the technical details of economic policy. Lagarde also speaks today.
  • The December US trade deficit is due. US trade taxes have not returned the trade deficit to the levels that existed before 2016. Deficit financed tax cuts are to blame. A current account represents government plus private sector borrowing. The US government deficit is forecast to hit USD 1 trillion next year.

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