As April ends and May begins the soil in the north central states in the USA is very wet, not firm, and if you were to drive over it you would most likely get stuck. The current political and financial state of the US, EU, Japan, and China are also not very firm, filled with potential potholes and sinkholes.
In the last four weeks international unrest has greatly increased: Syria was accused of using chemical weapons against its own people. Russia is accused of lying about the removal of the chemical weapons from Syria and of aiding and abetting Assad. President Trump without asking the world’s permission, during his meeting with Chinese Premier Xi, bombed Syria and the military installation which the US believes the chemical weapons came from. Russia then accused the US of acting illegally according to international law.
North Korea has been firing ballistic missiles toward Japan and others and making threats against the whole world. The US issued statements that NK needs to behave or else, causing military dictator Kim Jung Un to say he would destroy the US and daring them to retaliate. Trump then sent 5 ships off the coast of Korea to participate in war games with Japan, Australia and South Korea. Russia then sent an aircraft carrier 25 miles off the coast of the US and the Chinese have mobilized 250,000 troops on the northern border of NK. Putin has made it clear that things are spiraling out of control and cautions all sides not to take military action in a speech on Thursday April 27th.
Along with these events the US dropped the largest non-nuclear bomb in existence on top of a series of ISIS tunnels in Afghanistan. ISIS, however, has continued terrorist actions in France and other nations over the last week.
Politically, the Netherlands is trying to form a coalition government in the next 60 days or they will have another set of elections. France has just had the first round of elections leaving LaPenn (the anti-establishment, anti-EU candidate) and Macron (the establishment candidate) to battle one another in a runoff election on May 9th. PM May of the UK has called elections 3 years early hoping to gain more seats and strengthen her ability to negotiate the Brexit from the EU, as the negotiations are not going well. Italy has not called elections yet, but the anti-establishment candidate has a commanding lead.
On the economic front: the EU is treading water with a nearly zero growth rate, the US growth rate was reduced after the first quarter from 2.8% to .2% by the Atlanta Fed, China’s debt is scaring everyone including them, but Russia had one of the most improved economies in 2016 and is pegged to be one of the best preforming economies in 2017.
President Trump unveiled his tax plan this week which doubles the deduction for married couples, lowers the US Corporate tax from one of the highest rates at 35% to 15%, and reduces the number of tax brackets from 7 to 3. It eliminates the estate/death tax, retains mortgage and charitable deductions, but eliminates other deductions… more details to follow.
On April 28th, the government is slated to run out of money, but will probably pass a temporary extension for a week. A huge fight is brewing whether to raise or not raise the debt ceiling and at this point the various Washington factions each think they can win, so unless something changes a battle is almost guaranteed. If the debt ceiling isn’t raised in the next month or two there will be a government shutdown, like there was during the Obama administration. This time, however, things are different and no one knows what Trump, the Freedom Caucus, the Dems or the rest of the House and Senate will do.
US and global markets have not factored in a US government shutdown, a new war, another EU exit or non-establishment elected leader, so if one or more of the events occur, it will certainly rattle global markets.
Until next time,
Media Source Links
Congress Does Bare Minimum to Keep Government Open Next Week (4-28-17
US Economy Expands at the Slowest Pace in Three Years (4-28-17) Bloomberg Video https://www.bloomberg.com/news/videos/2017-04-28/u-s-economy-expands-at-slowest-pace-in-three-years-video
Federal Reserve Bank of Atlanta GDP Forecast for 2017 (4-27-17) https://www.frbatlanta.org/cqer/research/gdpnow |
White House Unveils Trump’s Opening Tax-Cut Bid (4-26-17)
EU Toughens Brexit Stance in Sign U.K. Vote Won’t Alter Approach (4-20-17) https://www.bloomberg.com/politics/articles/2017-04-20/eu-toughens-brexit-stance-in-sign-u-k-vote-won-t-alter-approach
These Economies Are Seen Improving Dramatically This Year (3-20-17)