Biden’s Consistent Ambivalence To Principled Action Costs Him With Students And The Fed: The Action For May 1, 2024
Joe Biden’s limited appeal gets trenchant analysis from the Times this morning as they focus on the remarkable symmetry of events concerning Columbia University 56 years ago and today. The pitched battles between student protesters in 1968 was more ferocious than today’s variety, a fact that can easily be read as an omen. And Biden played no role in those protests while making use of multiple draft deferments as he attended first college and then law school. The Times notes Biden’s ambivalence to protests likely fuels student anger, just as his approach to America’s military and national security throw Republicans into hysteria. Biden presents a face of avuncular opportunism, not principle or consistency, and this helps explain why he is blamed for everything the right wing can conjure up.
Biden’s inconsistency also fuels hawkish Fed policy, as his actions to raise inflation were absurdly couched in terms of inflation reduction. This afternoon the Fed is likely to pivot to a hawkish stance, a fear that’s taken the S&P 500 down to the lower ends of its current trading channel. I believe at worst the index collapses down to the April lows and at best simply consolidates as the collapse is temporarily averted.
The bears have control for the moment as several indicators reveal pessimism on corporate earnings and the macro environment. These include:
Quality Of Earnings Trend: Over the past few quarters the largest firms have generally experienced worsening credit terms, margins and inventories, signaling future profit stagnation or decline.
Short-Term Treasury Rates: Short rates are rising, a portent of higher inflation and/or Fed rate hikes, potentially bearish for equities.
Developed Market FOREX / $US: The dollar is getting stronger against most major currencies (€, ¥ and Renmimbi) and that’s usually bad for global growth.
Emerging Market FOREX / $US: Nations like India, South Korea, the Philippines and Mexico are getting weaker against the dollar, and that’s bad for global growth since many key imports are priced in $.
Liquidity Metrics: Measures of money flow across the globe are trending downwards lately, which hurts equities.
Geopolitical Issues: Developments around Eurasia are a clear negative for equities.
The action yesterday and overnight did offer one significant carrot to the bulls, however, namely the drop in WTI Crude Prices, which helps consumers and the global economy. Should the Fed sound a smidgen less hawkish than feared the bulls will leverage the decline in oil to push the S&P 500 back to the top of its trading range, at which point another opportunity to short the market may appear.
Yesterday at the close I sold a portion of my current position in the inverse levered ETF SPXU, consequently my current positions include 3M (MMM and its spinoff SOLV), Pfizer (PFE), and a smaller but still moderate position in SPXU, which nets out to a moderate short position in equities.