Talk From The Trenches: Trying to Avoid Crazytown

By Bill Sokolis

US

The political fireworks coming out of Washington this week have been a

distraction for US markets gradually returning from late summer holidays.

     More like a unwelcome distractions as Bob Woodward's book "Fear" that won't

even be published until September 11, describes a volatile, unstable White House

described as "Crazytown".

     The bombshell was followed by a second a day later after an anonymous op-ed

in the NY Times from an "senior administration official" described a resistance

"working diligently from within" President Trump's administration "to frustrate

parts of his agenda and his worst inclinations."

     Markets took it all in stride, instead focusing on trade deals and tariff

threats. NAFTA negotiations with Canada really haven't gone anywhere, but

President Trump did announce late Thursday he believes Canada will "end up part

of a new NAFTA" as the US will make a "fair" trade deal with Canada.

     Meanwhile, rates traded with a risk-off bid Thursday amid concerns of

another $200B in tariffs levied on Chinese goods threatened last week, while

rumors Japan might be the next target for tariffs.

     UBS strategists issued warnings that S&Ps could "drop 5% if the U.S. levies

25 percent tariffs on an extra $200 billion of Chinese goods."

     While markets continue to price in a third rate hike for the year at the

September 25-26 FOMC meeting, a sharp drop in equities and/or slowdown in the

economy would signal a pause in tightening at the December 18-19 FOMC.

     Case in point, NY Fed President Williams stated Thursday that a current

"lack of inflationary pressure means" there's "no need to raise rates faster",

and that "slow wage growth" is "evidence the Fed can be patient in an economy

that still has room to run."

Talk From the Trenches is a compendium of chatter from trading rooms, and is

offered as a gauge of the mood in the financial markets. It is not necessarily

hard, verified news.

--MNI Chicago Bureau; tel: +1 312-431-0089; email: bill.sokolis@marketnews.com