Markets shrug as Trump sacks FBI director Comey

Stocktake: markets snooze; Gundlach trolls the media; Snap shareholders feel the pinch

Donald Trump's sacking of FBI director James Comey stunned the world last week, but investors barely noticed, with gauges of market volatility hitting multi-decade lows.

One can argue investors are right to shrug. Stocks are largely driven by economic fundamentals, and right now they look good. US first-quarter earnings are projected to grow by 13.5 per cent, the strongest annual growth rate in six years.

Still, one might have expected some sort of a reaction from markets. Wall Street had been hoping for big corporate tax cuts and financial deregulation, but Trump's recklessness and myopia has cost him valuable political capital, further reducing his ability to enact his legislative agenda. As for his judgment, what can one say? Are Trump's advisers clueless, or is he ignoring them? And, as Michael Bloomberg asked last week, which of those scenarios is more troubling?

Questions about Trump’s judgment are hardly new, while investors have grown increasingly sceptical about the likelihood of sizeable tax cuts. Accordingly, the market reaction, or lack of, may simply reflect this scepticism.


Still, it’s not good to have a loose cannon in the White House. As a Horizon Investments note last week cautioned, “The spectre of a presidency in trouble is not a good story for the markets – or the country.”

All quiet – and a bit boring – on the markets

Talking of volatility, it’s difficult to overstate just how sleepy things are at the moment.

As in, really sleepy. The Vix, or fear index, is at its lowest level in almost a quarter of a century. Deutsche Bank last week noted that in 10 of the previous 11 days, the S&P 500 moved by less than 0.2 per cent. Since 1927, such a run has only ever happened on one other occasion. LPL Research’s Ryan Detrick noted the index traded in a daily range of less than 0.5 per cent on 14 consecutive days, more than twice the previous record.

While there’s no fear, there’s no excitement either. On one day last week, the S&P 500 hit an all-time high while gaining 0.004 per cent – the smallest gain on an all-time high in more than 20 years, according to Detrick.

Bond king blasts media with Trump-like tweets

Billionaire investor Jeffrey Gundlach isn't happy with the media.

The so-called bond king opened a new Twitter account last week under the handle @TruthGundlach, where he ranted about inaccurate media reporting about him, complaining about “haters”, “fakers” and “fake news”. There’s a distinctly Trump-like quality to Gundlach’s tweets, both in their aggressiveness (“No wonder no one listens to you!”) and in their tone (“Wow. So far off. No point going to BI as a news source. Sad. Used to be OK”).

The irony is the press actually gives Gundlach an easy ride. "Gundlach, 57, is primarily a bond investor who has built a career making prescient market calls," Bloomberg reported last week. Mainstream media outlets are forever describing Gundlach as prescient – google "Gundlach prescient" to get a flavour – but he's not. Yes, he predicted Trump's presidential win; yes, some of his other market calls have been accurate.

However, Gundlach throws predictions around like confetti; some are bound to be right. Last year, he said emerging markets would plummet 40 per cent; within days, a year-long rally began. He said US stocks had 2 per cent upside and 20 per cent downside; they’re up over 20 per cent since then. In 2011, he said the S&P 500 would more than halve; six years of gains followed.

Gundlach is half-right, then, about how reporters should “learn to fact-check”; they should stop describing him as prescient.

Snap shareholders feel the pinch as stock falls

Many of the millennials who bought Snap stock during March’s initial public offering (IPO) are likely beginning to see the wisdom in the old Wall Street joke about a long-term investment being a short-term trade that’s gone wrong.

The stock, burdened by a stratospheric valuation following one of the most-hyped IPOs of recent years, fell by a quarter last Wednesday after reporting slower user growth and revenues.

Chief executive Evan Spiegel's nonchalance didn't help. Spiegel, 26, laughed when asked if he was scared by the threat posed by Facebook, which aims to crush Snapchat via its main photo-sharing app, Instagram. Spiegel's guff about Snapchat's creativity – "people really enjoy looking like a puppy" – did little to reassure.

Anyone who bought at the stock’s early peak of $29 is now seriously under water. Snap fell as low as $17 last week but still looks expensive. Pivotal Research, for example, has a $9 price target on the stock.

Shareholders may be shuddering but Spiegel, who banked a stock-based bonus worth almost $600 million for taking the company public, doesn’t seem to feel their pain, saying it “should be a fun rest of the year”.

Indeed. As Bloomberg’s Matt Levine quipped, better to disappoint investors after you’ve taken their money than before.