Sink or swim on tax reform is essentially how President Trump put it, in a speech late Wednesday afternoon. His point was that the economy could not really ‘take off’ without the cuts (and capital repatriation), and while that’s not really doubtful, it does contradict those who believe it already is flying.

In these quarters, we’ve felt the economy is growing slowly and languishing a bit in most areas, with a post-storm (and -fire) reconstruction boom actually pending. The assumptions about the need for tax reform are correct; and of course there is my slightly cynical view that the Fed needs to hike rates just a bit almost regardless of whether it’s justified; and because they don’t want the economy to become heated actually. Then they’ll have a basis later-on to cut rates if the economy retreats into recession. However that could fail in a way; because of the likely construction boom following the horrendous as well as life-threatening fires that continue to burn uncontrolled in California.

As to Trump, his comment means the President is contradicting himself a bit (as he has often spoken about the economy soaring before any tax relief of course); when in reality the market move has been optimism and confidence based on the regulatory relief and hoped-for tax reform, as I’ve contended. So yes it matters, and he’s essentially right; because the market’s priced-in most of it already; therefore failing to enact a tax bill would really throttle this move; no matter what the permabulls want to say about that prospect.

Meanwhile, of course it’s often seen that a market holding this far into Fall is unlikely to break; but we still remain on guard for correction; not catastrophe unless of course a huge exogenous event were to occur (as the meetings in the Situation Room over Iran and North Korea remind us isn’t totally foreign to market concerns).

Bottom line: To us this is still an exhaustion phase, meriting caution.