There's A 'Changing Of The Guard'

There's a 'changing of the guard' underway this year; and it's characteristics are not yet accepted by some of the 'old Guard', well beyond our own borders. It is seen in Canada, where the shift has already occurred; pending Europe where leaders are stunned that the post-War multicultural harmony didn't homogenize to the degree political correctness advocated and embraced for years; while for sure in the Middle East, it's basically a group of last-Century monarchs or heavy handed dictators (some using democracy to get elected then turning their backs on the will of their peoples); and generally a question of which bad leadership is a worse choice for the modernization the younger generations generally want.

That 'desire' by the new generation is key: while the fundamentalists interlopers are the loudest voices making populations (especially young women) nervous to say the least, (because even Muslim youth raised in Europe impose their views with threats upon their own ethnic groups, thus retarding a vocal rising-up by the majority), what is clear is that the madness of imposed tradition, is 'desired' cast aside by today's youth, who generally want to see a dynamic new future.

That's a tough call, especially in developed nations where digitized productivity is actually restricting growth for any but the most well-trained and sophisticated. At least for jobs that let one thrive, not merely survive. This 'changing to the new Guard' is finding resistance, pretty much everywhere. Or it's compelling the 'old' to revise their thinking, revive their idealism, or accept the folly of the old guard.

That folly has precedent; with today's candidates (such as in the USA) merely a messenger of the frustration borne out of more or less comparable policies from governments of both sides of the aisle. Sure, there is a health plan, but not ideal just as there is a social safety net, but much of it was pulled by the same people who contributed to exporting the jobs that would deny need for a safety net had they be kept in the USA. The 'people' have figured this out; they are revolting in a sense (more so than those asking for a free ride, though some of that prevails too), and that's how you end up with seeming polar opposites that appeal quite strongly and even pull members of the opposing parties.
 

The political titans faltered on the Republican side; prevailed on the Democratic. The ascendancy of Donald Trump (more so than Sander's attempt, as he's been a Senator for a long time, and that's going to be the case for Rubio too) reflects the loss of the kind of optimism or the so-called staunch conservatism the core 'old Guard' pushed upon the candidates. The results this evening are humiliating only to those who still don't grasp voters don't believe mainstream promises for the future; as even Hillary moved closer to Sanders on many 'reform' issues. As for Trump, he absolutely needs to chill; stick to his outsider guns (but less tough cookie in some aspects); as the Party accepts that he is not establishment just because he's (presumably) wealthy. He reflects frustration and anger at what an old Guard (both parties) has done 'to' the American people, not for them.

This is beyond the old saying I recall from gentler times: "if you're not idealistic when you're young, you have no heart. If you're not conservative when you're old, you have no brains".

 

Today this is not just a battle between the 'elites' and the populists; it's about in my thinking a desire to reverse policies that disrupted our lives for decades in a slow motion decline (offset at time by 'cheap' funny money and financial gains, giving an illusion of broad prosperity, while our Nation was being deconstructed for the so-called 'level playing field', which mean leveling our fields).   

Bottom-line: this matters to the market now. We can't be a fractured society for long. What can be said is that the 'right' (perhaps some 'tea partiers') reflected a frustration, but leaned too much toward an ideologue approach, to gain appeal of a broader nature. Ironically, given his bombastic tone, Trump might actually (if he tones down what we all know is necessary) represent a far more centrist and moderate Republican perspective, and that's a point I've made here before now. It's not that he's ideal, but he's non-establishment (very much establishment in a private and business world, but that's a qualification, not a blemish these days). And his comment that he's a 'unifier' not a divider, can actually become factual if he gets-off the rhetoric of the primary stump, as he moves toward the General.

This also matters because the world is watching (and learning about a process, so different than usual, that aside the concern of shredding relationships). It tells volumes about 'actual voter power' among Americans, when they've finally had enough and decide to engage in change (and like I said, all they got was BitCoin before). There is actually a great 'global' civics lesson in this year's US Election.

The downside is the bearish argument that corporate and international plans are difficult to make, because you don't know what trade policies will be in 2017-'20. That's caused more than one analyst to become bearish 'if' Trump wins. My take is this market goes down regardless down the line (many are defensive so you'll get periodic but sketchy short-covering rallies within context of another unwind), and that it won't wait for more clarification about the coming General Election. I'll make the 'why' real simple: because the earnings estimates are too high; GDP is going to be slower (more downward revisions); and multiple compression, not expansion, is going to characterize valuation. The 'newly nervous' analysts that focus on politics, have a point, but mostly they not have a crutch to lean-on, as a rationale as to why 'only now' they'll have figured-out that there's renewed risks.

In sum: our short-term view has been of a market on-hold and complacent from a superficial view, going into the FOMC and the year's first Quarterly Expiration. Internally (such as today a Dow up 22 with almost 3x1 declines over advances), market deterioration has been noted. Pundits are trying to say the market simply ignores bad news (like Oil dipping back as we've forewarned since last week's reticence by Iran and Kuwait to consider Production freezes). Not really so; as it is instead a handful of big-cap (and most-shorted) stocks holding the Indexes up while the broad market has been on the defensive both Monday and Tuesday.