Wednesday at Davos: Five Things You Need to Know

Today at Davos: Five Things You Need to Know

Wednesday at Davos: Five Things You Need to Know
The Congress Center, venue for the World Economic Forum (WEF), center, stands on the Promenade at dusk in Davos, Switzerland (Photographer: Michele Limina/Bloomberg)  

(Bloomberg) -- Follow our full coverage of Davos 2018 here.

U.S. President Donald Trump’s economics team landed in Davos, Switzerland, bringing with them their boss’s “America First” agenda. U.S. Treasury Secretary Steven Mnuchin broke with his predecessors by saying publicly that a “weaker dollar is good’’ for trade, sending the greenback to its lowest level in three years. Meanwhile, Commerce Secretary Wilbur Ross unnerved investors by saying a “trade war’’ is underway and that the White House planned more measures to support its exporters. And it’s only Wednesday.

“America First”

Whether or not the White House choreographed the dollar’s slide, it may have just declared open season on the currency. The greenback was caught in the rhetorical crosshairs after Mnuchin endorsed its fall as a benefit to the American economy. The comments came days after Trump slapped tariffs on solar panels and washing machines. “This is about an ‘America First’ agenda,” Mnuchin said. “But ‘America First’ does mean working with the rest of the world. It just means that President Trump is looking out for American workers and American interests, no different than he expects other leaders will look out for their own.” For its part, China is looking to further open its economy this year.

Playing Europe’s game

Wednesday at Davos: Five Things You Need to Know

The continent’s heavy hitters, German Chancellor Angela Merkel and French President Emmanuel Macron, were the big tickets Wednesday, and it’s safe to say that they differ with their colleagues from across the pond. Merkel warned against the “poison” of populism that leads nations to look inward as she made the case for a common European approach to economic policy. Macron, following her later in the day, is urging global elites to do more to narrow the inequalities that have resulted from global capitalism’s excesses. Italy’s Prime Minister Paolo Gentiloni, however, was less circumspect. He assailed Trump’s economic policy as a threat to global growth, urging Europe to “play its own game” and fill in gaps left by U.S. businesses.

Dimon isn’t worried

Wall Street executives are bracing for higher interest rates, but they’re betting that incoming Federal Reserve Chairman Jay Powell and his global counterparts can tighten monetary policy without crashing markets. “People are worried about the number of Fed increases that might happen this year,’’ James Gorman, chief executive officer of Morgan Stanley, said in an interview. “I’m not—I think it’s healthy.’’ JPMorgan Chase & Co. CEO Jamie Dimon echoed his sentiments, saying  a combination of strong growth and slightly higher inflation would leave central banks with no choice but to raise rates. Dimon added that he’s “really not worried’’ about them hitting the brakes too hard.

Bond bear Dalio

Significantly more dour than Dimon and Gorman, though, was billionaire hedge fund manager Ray Dalio, founder of Bridgewater Associates LP. He told Davos attendees that the bond market has slipped into a bear phase, and warned that a rise in yields could spark the biggest crisis for fixed-income investors in almost 40 years. While economic growth is in its late stages, he added, it could nevertheless continue to improve for an additional two years. The current economic environment is good for stocks but bad for bond investors, Dalio said, forecasting that the Fed would tighten monetary policy faster than it has signaled.

Bankers praise Trump

Trump will try to sell attendees on his economic policies in person come Friday, the final day of the World Economic Forum’s annual meeting. He can expect a pleasant welcome from American bankers, including Goldman Sachs Group Inc. CEO Lloyd Blankfein, who said his opinion of the Trump administration is positive. “I like a lot more stuff than I don’t like,” Blankfein said in an interview. “I’ve really liked what he’s done for the economy, and I think he’s gone out of his way to be very, very supportive of the system.” Dimon said he’s been focusing on policy issues rather than the rhetoric coming out of the White House. “What I’m bulled-up about is that policy makers are making good policy decisions in the U.S. about taxes, about proper regulatory reform,” he said.

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