RBC Warns “Seeing Clear Signs Of ‘Reflation Trade’ Unwinds”

Did Treasury Secretary Mnuchin play ‘reality’ bad-cop to President Trump’s ‘fantasy’ good-cop this morning?
RBC strategists Charlie McElligott and Mark Orsley reflect on Mnuchin’s 24 hour media blitz below as he reset tax plan expectations (lower) and pushed off infrastructure plans (later).
**BIG DEAL ALERT**: Treasury Secretary Mnuchin has now interfaced with the financial media 4 times in the past 24 hrs (WSJ, CNBC, Fox Biz and Bloomberg TV), all of which were opportunities to emphasize the key stock / USD / rates event input being the scope of the Trump administrations ‘corporate tax cut plan’…but did not. In these 4 media interviews, Mnuchin:
Explicitly stated focus is now on individual tax cuts against tax code simplification for corporates (‘we’re mostly focused on middle-class tax cut’). I. E. a downgrading of aspirations from the prior-focus of ‘lower tax rates’ to now said ‘reform.’ Infers / implies changes in corporate tax code rather than emphasizing previous aspiration of 20% corp tax rate. Also proved out that BAT is still being debated (‘looking closely at border adjustment tax’ followed by ‘some issues with border adjustment tax’) which implies they know they can’t get to 20% corp tax rate without it (and thus the shift to individual tax cut prioritization). One could infer that if they are downshifting expectations on corp tax cut to corp tax simplification, the BAT itself becomes unnecessary complication, and this is an input into a weakening USD.

This post was published at Zero Hedge on Feb 23, 2017.