European, Asian stocks declined, halting a global rally that sent U.S. stocks surging to new all time highs faltered, weighing on the S&P although the index rebounded modestly after a kneejerk announcement lower overnight after Trump's National Security Advisor announced his unexpected resignation.
In his recent TV appearance, last week David Stockman suggested that President Trump would be better suited to spend some time actually addressing economic issues instead of the administration's travel ban for immigrants from Middle Eastern countries, which Stockman called "a giant misfire." Employing the 1992 Clinton Campaign motto of "it's the economy, stupid," Stockman noted "Trump was elected because flyover America is hurting economically.
European and Asian stocks, S&P futures, bond yields, the dollar and commodity metals are rose, in some cases making new all time highs, lifted by the latest reemergence of the "Trump trades" as hopeful investors once again bet that the U.S. president's tax reform plans will boost economic growth and corporate profits, despite another warning from Goldman that the president's fiscal plan is about to be derailed.
After an outstanding start to the year for Equity hedge funds, this most recent gap move higher in stocks (while rates and FX remain firmly ‘in range’) is pretty-much exactly what RBC's Charlie McElligott warned is a "bad scenario" for equities funds.
A curious dichotomy has emerged in global fund flows.
According to the latest flow report from BofA's Michael Hartnett, "it's risk-on in Bonds, it's inflation-on in Stocks, and EM is now playing role of cyclical catch-up trade." In short, in the last week the Trump Trade has emerged from the dormancy in which it had faded for the past month.
But when one looks at where the money is flowing, it is going everywhere except where one would expect, as US stocks continue to be shunned, based on EPFR data.
Here are the details.