Forget NFP. In fact, forget any data. Turn instead to the media

Yes, we are already aware of the power of social media, via Tweeter-In-Chief Donald Trump. If he carries on like this, what will he have left to announce on inauguration day itself? That’s the day, by the way, that most investors care about this month, at least according to a Goldmans survey:


Given that he’s a reality TV star, Trump will no doubt leave some big announcements on the table for The Big Reveal on Jan 20th. The one that should be most in people’s minds is some kind of trade war / currency war with China. But we’re still too busy pretending he’s the new Reagan. Because that’s easier, isn’t it, than realising we are in a new world, where #FOTU will replace #FOMO.

And into this vaccuum, what will step in? Why, none other than anyone who shouts loudly enough, and particularly anyone who claims to represent the most powerful group of all, The People. The People Have Spoken, and don’t we all just know it. Instead of the world being driven by faceless central bankers propping up risky assets and in doing so, driving inequality, we now have The Man On the Street making himself very much known. (And amen to that, for without them we have technocracy rather than democracy). So who is the voice of the people? Well, we have seen and will see many specific characters represent this (Alexis Tsipras, Nigel Farage, and now Marine Le Pen) – but don’t forget about the much derided media. Yes, Twitter can make one voice sing loud, but there is still a lot of heft in the old skool print media. This is why the outpourings from the German newspapers yesterday are so relevant. Both the popular tabloid Bild and the broadsheet Suddeutsche Zeitung contained editorials demanding that the ECB should raise interest rates. Even business daily Handelsblatt pointed out that Germans were losing billions of euros a year on their savings from the ECB’s policy. Sure, their combined distribution is around only 10% of the number of German households, but what matters here is their role as an echo chamber. The German politicians care about what the newspapers say, because that’s a way to take the temperature of the electorate. And oh what’s that, an election hoving into view in just 9 months’ time? And savers would be one of the biggest sections of the voting public? And they’re still not getting any return on their savings, just as it’s revealed that German inflation nicely jumps up to the ECB’s target of just below 2%?


If you think that the ECB are on autopilot this year with this kind of thing going on, then you’re dreaming yourself into a daze. The pressure from Germany is going to build and build. Trump and Theresa May have already ploughed fine populist furrows by criticising QE from their country’s central banks. How will the ECB be able to withstand this? The articles from the German papers weren’t just flaccid commentary on the parlous state of savings returns: Bild screamed “Raise Rates Now” and SZ warned “Change Course Mr Draghi”.

Another reminder, if it were needed, that it’s not about monetary policy divergence any more. It’s about political pressures.

Oh and one more chart from that GS investor survey…. over two-thirds of respondents though Marine Le Pen only had a <40% chance of winning:


Given that it’s likely she gets into the second round, where it’s a two person run off, that’s a fairly distant pricing from the 50-50 baseline. Let’s not forget that Trump was only priced at 36% in his two person race on election day itself.

Oh but we do forget, don’t we? It’s so much nicer to plough along with the same narrative of the past 8 years isn’t it… cheap money forever, buy risky assets forever, and just follow the central banks. Ooh what could payrolls be? Ooh when will the Fed hike? Ooh…. pick up a newspaper.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.