February 8, 2017 at 1:36 pm #27063VitalogyParticipant
Powerful voices on Wall Street are expressing concern that President Donald Trump isn’t going to be everything that investors had hoped for.
In recent days, three of the nation’s largest banks have issued reports that highlight the risks that come with a Trump presidency. They are warning investors to be careful.
U.S. stocks soared right after Trump’s election election because investors were eager for the corporate tax reform, regulatory relief and infrastructure spending he promised.
Instead, in his first few weeks of office, Trump has highlighted several controversial issues that businesses generally oppose, such as dropping out of trade deals and imposing new limits on immigration. And it may be hard to win approval for the parts of Trump’s agenda that Wall Street does like amid stark political polarization.
Also this week, Wells Fargo (WFC) pointed to the problems posed by the protests and political unrest that has marked the early weeks of the Trump administration.
“Controversial policies and geopolitical events could impede the progress of U.S. and global economic recoveries,” it said in a note on Monday. “The potential for disruption is ever-present. The possibility of a near-term pullback in equity and commodity markets has us more conservatively positioned in most portfolios than in recent quarters.”
A Bank of Americ (BAC)note out Monday suggests that the relatively low U.S. unemployment rate will make it difficult for the economy to kick into a higher gear, as predicted by Trump. The report added that the president’s plans for spending on infrastructure may simply lead to higher wage inflation and a stronger dollar, which in turn could make it harder for U.S. goods to compete overseas.
“The risks of a recession rise as an economy approaches full employment and begins to overheat,” it said.February 8, 2017 at 2:17 pm #27068Andy BrownParticipant
“Our deepest concerns are in accord with those expressed by Harvard government professors Steven Levitsky and Daniel Ziblatt. … They note that the institutional safeguards to protect our democracy from the potential danger of Trump’s apparent authoritarian inclinations may be less effective than we think,” Klarman wrote in the investor letter dated Jan. 20.
“In short, tail risk has grown. Investors must remain alert to opportunity, but also vigilant for actions that weaken or undermine the very system that has made our country the leader of the free world as well as the democratic, free-enterprise engine that drives the global economy.”
“Market confidence is threatened when the norms of a democratic society are under attack,” he added in the letter, a copy of which was obtained by CNBC.
Tail risk is the risk of an asset or portfolio of assets moving more than 3 standard deviations from its current price. In particular, most asset managers are only interested in the downside risk, i.e. moving more than 3 standard deviations below its current price.
(that puts it on the edges of the bell curve)
https://en.wikipedia.org/wiki/Standard_deviationFebruary 9, 2017 at 4:10 pm #27111LurkingGrendelParticipant
Generally speaking, our economic system rewards consistency and dislikes surprises.
Clownstick Von Fuckface behaves like an erratic child. It’s not hard to fathom how reasonable people, whatever their political identification, could find deeply alarming on many, many levels.
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