The Haitian Horrowshow Could Haunt Biden Come November: The Action For May 9, 2024
The Western Hemisphere has found another horrorshow to match those across Eurasia as Haiti descends into violent anarchy per the Times this morning. The problems of this small nation dwarf those of its tourist-loving neighbor, despite sharing the island with the Dominican Republic. For this and other reasons Haiti gets little respect as its problems are largely considered of its own making, since the DR suffered under colonialism and superpower manipulations as well. And there is no defending the inefficacy of aid to Haiti and the question of what possible alternative there could be to the free-trade orientation taken by the DR starting in the early 2000s with the CARICOM and US free trade agreements. Given the improbability of any government settling the nation down to such a policy the most salient consequence of this latest horrors is the impact on the US election.
The potential for Haitian migrants shut out of the DR to foment an even greater border crisis could create catastrophic problems for Biden in securing enough support to beat Trump. While it helps Biden that the public is getting reacquainted with the sordidness of the Trump family it’s unlikely Biden can stomach another major controversy given his obtuse positions on nearly every issue, foreign and domestic. Biden may stand on solid principles but in practice his policies are counterproductive, stoking inflation and anger at home and inflation and derision abroad. For half the country the return of Trump would signal a higher likelihood of tax cuts, and this could tip him over should Biden sink further on the immigration issue. The irrational exuberance of the markets in pushing valuations ever closer to the yield on risk-free treasuries belies Wall Street’s preference for tax cuts too.
The bulls have control for the moment as Biden’s problems present upside while a few indicators reveal confidence in corporate earnings and the macro environment. These include:
Shanghai Composite Technicals: Chinese equities are trading well and that bodes well for the global economy.
Inflation Expectations: Investors expect lower inflation over the coming years, implying lower interest rates to come, potentially bullish for equities.
Zinc Prices: Few commodities are as broadly important as zinc, and rising prices for zinc signal better than expected global demand, which is usually good for equities.
But based on the action yesterday and overnight there are also some risks the bulls need to climb over, including:
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.
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 $.
Geopolitical Issues: Developments around Eurasia are a clear negative for equities.
My current positions include 3M (MMM and its spinoff SOLV), Pfizer (PFE), and a moderate position in SPXU, which nets out to a moderate short position in equities.