If American Politicians Openly Kissed The French Instead Of Keeping Their Distance Global Confidence Would Soar: The Geopolitical — Stock Market Connection

The GOP’s rare push for fiscal discipline butts heads with Biden’s no-limits statism, restraining global confidence since debt default is too significant to be dismissed. This plays straight into the hands of Eurasian autocracies that desire cleavage in the Western Alliance based on American economic declension. Since Biden wants the public sector to deal with every new and old social problem despite numerous foreign policy failures that have emboldened Russia and China to interfere in domestic politics and reshape the international trading order, Europe is increasingly entertaining the notion of separating from America. A vicious cycle of Trumpism-Bidenism isolating further from European allies and driving more protecionism can only wreck investor confidence, since the Chinese reopening is just a mediocre corrective to bad policies and Russia is self-immolating. Consequently I don’t expect the global economy to grow robustly and help American multinationals grow their earnings. With the S&P still 2 percent away from those levels, the bulls still have the edge but this is waning. The volatility risk premium points to a higher market over the next few days, but my technical reading of key stocks in the S&P 500 is neutral. There is one negative factor across global asset classes. The action in currencies signifies $US strength. Expect the S&P 500 to make a run to 4210 over the next few days before falling back hard.

France has always voiced pessimism about America’s competence in foreign policy and its leader Emanuel Macron is pushing Europe to compete with America more and more. With no alternative to Biden but the even more chauvinistic GOP the key question for the Western alliance is whether Macron succeeds. Thankfully he can do only minor damage, putting the onus on Biden to restrain his statist proclivity and let Americans manifest the power of liberal individualism over collectivism and thereby set Europe at ease.

Macron has no answers to the historic French problem, namely the Two Frances that fail to unify and produce the dominant nation in Europe. Considerably larger than Germany and with important overseas territories that exceed all other nations the conundrum facing French leaders is why their beloved nation plays economic second fiddle to unloved Germany and must often speak in plain English on the global stage. No leader has mended the Two Frances since Catholicism has never produced a coherent civic morality, leaving that to Parisian intellectuals with well-founded disdain for the Catholic hierarchy and its vaunted history. Were these intellectuals better able to articulate a civic morality French Catholic conservatives could find true solidarity with Parisian liberals and create an efficient social democracy that equalled Germany. But this is impossible, and French leaders can’t understand this.

French elites postulate a reverence for pan-French solidarity, based on individual dignity that accrues because all French have a reverence for grace and grandeur that manifests in French language, cuisine, manners and art. From this sweeping idea comes the belief that France can be a uniquely participative republic yet still profoundly hierarchical, where the individual voices her needs and desires with grace and the elites empathize and strive to forge a nation of grandeur based on such aggregated grace. The key cost of this ideology is that the individual right to be left alone is minimized in favor of the obligation to voice and listen in the public forum with grace, which supposedly builds a commonality that solidifies into solidarity.

Life’s antagonisms are too great for any individual to rely on aggregated grace; what is needed is either a liberal order where individuals can choose their own path and feel secure based on strong and potent national security, or cultural unity backed with culturally-attuned national defense, always on guard against fascist tendencies. France is stuck with neither, since French culture is divided by those who recognize Catholicism as integral to French history, language and manners and those who disdain it. While all French can be mannered and speak the same language, they can’t unite on history unless they either agree on Catholicism or expel it. Here the intellectuals fail because they can’t agree on how to handle life’s antagonisms without the help of metaphysics as embodied in the poetic grandeur of the Bible and other Catholic artifacts well-regarded across the world. Such lampooned philosophies as existentialism and deconstructionism embody the Parisian non-answer to life’s antagonisms.

So while the French distinguish themselves with more respect from their former colonies than other imperial powers (e.g., the UK, Germany, Spain, Belgium and Italy) this only leads French leaders to vain efforts at French exceptionalism on the global stage. Consequently Macron is emboldened to try what DeGaulle and every lesser French leader has failed to do. AP notes “Macron has been one of the most prominent advocates for a strong EU response to the $375 billion U.S. Inflation Reduction Act announced last summer by President Joe Biden to favor clean energy technology. He seized the occasion to present the pension reform as part of a “package” that has already produced “results.” “If we want to be more competitive, we must work a little longer,” he said. Since taking office in 2017, Macron has cut business taxes. He has made it easier to hire and fire workers and more difficult for the unemployed to claim benefits, amid other pro-business policies. Macron said 300 new factories had been created since 2017 — two thirds in the past two years — while 600 had been shut down in the previous decade. The COVID-19 crisis and Ukraine war have shown that domestic industrial production is needed to strengthen the country's sovereignty, he stressed.”

It’s incumbent on America to remain liberal and pursue a rational foreign policy in order to restrain France from breaking away and taking Europe along with it. This redounds to global equities since France plays a unique role in global finance: as the dominant producer of luxury goods the French economy has unique resilience and its stock market is a unique bellwether for global economic vitality. Even if Asia takes more share of manufacturing away from America and Germany the French will remain dominant in high end goods and design, providing a key economic benefit that redounds to all who ally with France. In the near term the markets can rise if Biden gives in to the GOP, but in the event both sides kick the can the outcome will be a hard fall once the bulls hit resistance.

My current positions include a moderately large cash position, 3M (MMM), Pfizer (PFE), the levered ETF UPRO and inverse levered ETF SPXU, all of which net out to a significant long position in large-cap equities.