Trump vs Pelosi: Battle Royale

Abraham George Macro View

We have been alluding from weeks that the Republicans and Democrats will not find a common ground to extend the coronavirus economic relief program that expired on 31 July.

Finally, the President had to exercise his executive action which has invited much scorn from House speaker Nancy Pelosi. Pelosi says the President’s actions were insufficient and unconstitutional. While Steven Mnuchin the Treasury secretary who is the man behind the show said that it was cleared by the legal counsel and holding up relief for millions of Americans could have serious consequences.

Pelosi is planning to go to court on this and it looks like the never-ending saga between Trump and Pelosi will end only if Trump is not elected for a second term.

Meanwhile, last week the “house of mouse” (Disney) reported their first loss in almost two decades to the tune of 4.72 bio dollars. Think they are trying to recover all that from the long-awaited remake of the movie “Mulan” and making it available through Disney+ and charging 30 dollars for all those movie buffs at home. Jokes apart think Disney should be a buy for the long term.

Equities

Finally, the S&P 500 filled the gap to 3338 that existed from the close of Feb 21 and even extended more. The push to 3351 occurred with more shares declining than advancing and so was it with more down volume than up volume. What we conclude is that the current bullishness is in a very risky environment.

Bonds

The 30-year treasury bonds rallied to 183^06 marginally exceeding the previous high. However, we are not excited about the price action since then, so will stay put until a clearer picture emerges.

Euro

The Euro could have completed a structural top with its high at 1.1916 last week. The low of this move started at 1.0635 on Mar 23. As highlighted before the bullish sentiment is at an extreme and large speculator are very long the Euro. We are looking for a move down to the 1.1500 handle.

Gold

Gold rose to an intraday extreme of 2072 last week but has declined sharply since then. Daily sentiment index had risen to 93% for three days in a row and Market Vane’s bullish consensus was as high as 89 % matching the reading on Aug 22, 2011 before the major top on Sep 06, 2011.

We will continue to monitor if there will be further breakdown as there is still risk of one more high before market turns down sharply.

Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.