Macro Commentary
Men-ew-chin. In case you were wondering, that is how you pronounce the last name of President-elect’s pick for the U.S. Treasury post. Steven Mnuchin is classic Wall Street. Son of a Goldman Sachs partner, he was an executive at Goldman himself for seventeen years before running a hedge fund that financed Hollywood films and leading a consortium of investors to turnaround IndyMac bank after it failed in the financial crisis. He is another example in a recent string that shows that Trump is changing his tune from the pre-election rhetoric and moving a bit more middle in some areas. While there is sure to be criticism of Mnuchin’s profiting from the mortgage difficulties of everyday citizens, even the New York Times called him a pragmatist rather than an ideologue. After heavily criticizing Wall Street, Trump has now turned to two mainstream financial types for his top economic posts having selected private equity financier Wilbur Ross for Secretary of Commerce. It’s no wonder that financial markets are feeling a bit of the animal spirits thinking some of their own surely will not derail the economy. With Q3 US GDP being revised higher to 3.2% (from 2.9% previous) and an OPEC deal that has sent oil prices higher, optimism is swelling the market.
Attention now turns to the referendum vote this Sunday December 4th in Italy. Constitutional reform is the question before Italian voters. The proposal is whether legislative action can be taken by the lower house of Parliament without the Senate. The intent of Prime Minister Renzi, who has said he will resign if it is not passed, is to streamline reform efforts. The opposition led by the euro-skeptic 5 Star Movement contends that it is an effort to consolidate power in the hands of political bureaucrats out of touch with the people. Bolstered by the so-far favorable outcomes from Brexit and Trump, we may hear a loud populist voice.