The White House’s game of musical chairs

From John Gillin at the Stansberry NewsWire:

Larry Kudlow – television personality and former economic adviser to Ronald Reagan – was tapped by President Trump to be his new economic czar.

Mr. Kudlow is replacing Gary Cohn after he disagreed with the White House’s trade policy (tariffs) and subsequently resigned… Before he got the boot.

The palace intrigue hasn’t been this entertaining since… the Reagan era.

The night that Mr. Cohn “resigned,” S&P 500 futures sold off 43 points, about 2%.

Markets were in a frenzy that Mr. Trump’s protectionist rhetoric – raising 25% tariffs on steel and 10% on aluminum – would cause a global trade war.

That was until he exonerated Canada, Mexico, the U.K, and Germany from the initial penalties.

Mr. Cohn is all but forgotten… And Mr. Kudlow has been feted for his view that “growth is not inflationary… just let her rip!”

First-quarter earnings are behind us… and were categorically terrific. The economic data have been equally sublime. The University of Michigan consumer-sentiment survey released today was as ebullient, as I recall.

So why is the market shrugging its shoulders and treading water?

There is the notion that firing on all cylinders will jack up inflation more quickly than forecasters have modeled… And the Federal Reserve will have to play catch-up and do the same with interest rates. The market has sent a clear signal: If the 10-year yield moves above 3%, equities will fall from grace.

But rates have calmed down and inflation fears have been tabled… for now.

Next up is the Federal Reserve meeting March 20-21. This is Jerome Powell’s first meeting as Fed chair… And while his initial foray speaking to Congress at the Humphrey-Hawkins testimony may not make his scrapbook, he has had three weeks to polish his “Fedspeak“… And expectations are that he won’t rock the boat.

What is clear is that a changing of the guard in D.C. is like death and taxes. The market concerns about revenue growth eventually turned into bottom line earnings. Period.

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