Trader: “The Next Market Phase May Be Dominated By Genuine Disappointment”

Mnuchin’s Dose of Reality Yet to Bite
Steven Mnuchin’s dose of reality for investors in relation to the fiscal stimulus has triggered a disinflationary theme to markets that will impact many assets classes.
Yesterday, I wrote that Trump’s speech to congress on Tuesday may mark a capitulation point for reflation trades. It appears that Mnuchin has tried to pre-empt him.
Amid comments on a wide array of financially relevant topics, markets should really be focusing on his admission that the stimulus won’t help the economy much this year and the confirmation that passage of tax reform is unlikely to be imminent.
He reiterated that the administration is committed to an overhaul of the tax system by August. That’s still farther away than many investors had hoped for, and even that ‘highly aggressive’ timeline is unachievable according to Beacon Policy Advisors.
The start of 2017 has seen steam come out of some of the Trump reflation trades – long dollar and short Treasuries in particular. But once investors accept that the new administration won’t be able to work as many economic miracles as once hoped, there’ll be much more repricing required to get back to where we were before the election.

This post was published at Zero Hedge on Feb 24, 2017.