A Tidal Wave of Bad News Hits Donald Trump

by Greg Valliere, AGF Management Ltd.

HOW’S THIS FOR A REALLY BAD DAY? Donald Trump may not get to run against his preferred opponent; he’s been forcefully told by scientists that a coronavirus vaccine is at least a year away; American companies are cancelling conferences; and a Federal Reserve rate cut had no impact on the panicked markets.

THE NEWS IS SO UNIFORMLY GRIM for the president that his aides are scrambling to find new fiscal policies to avoid not only a recession — but a much tighter election this November than they were expecting just a couple of months ago.

FOUR STUNNING DEVELOPMENTS have rocked the White House:

1. Joe Biden’s resurrection: It was clear for the past few days that he had momentum, but we were surprised by the magnitude of his victories last night. Bernie Sanders’ solid showing in California will get him close to Biden’s delegate total, but we thought — incorrectly — that Sanders would have a comfortable delegate lead by this morning.

Biden, of course, is one bad debate performance away from plunging again (the next debate is on March 15), and Sanders could surprise in next Tuesday’s primaries in Michigan and Missouri, where he did well four years ago. But both of those states have lots of African-American voters, who overwhelmingly support Barack Obama’s vice president. Mississippi and Washington also vote next week.

This fight could drag on for several weeks or longer; the next big development will
be the withdrawal of Mike Bloomberg, perhaps as early as today. Elizabeth Warren also appears to have no path to the presidency.

What a shock for Trump, who clearly was relishing a presidential race against the socialist Sanders. The president will peddle a narrative to Sanders’ supporters that the Democrats’ establishment has rigged the process, but Trump has already begun to shift his focus, mocking Biden’s energy and mental acuity.

To reiterate our bottom line: Trump would be the overwhelming favorite against Sanders, but only a modest favorite against Biden because the Electoral College map would not be a slam dunk for the president. And the prospect of Democrats losing the House would greatly diminish if Biden, not Sanders, heads the party’s ticket.

2. Bad news from the scientists: Trump kept trying to put a happy face on the coronavirus narrative this week but Dr. Anthony Fauci and others forcefully told him that there’s no scenario for producing a speedy virus; it’s at least a year away. First things first — there still aren’t enough kits to test for the disease.

3. Some of America’s biggest companies have cancelled spring conferences, which will cripple economies in cities where they were scheduled. Anecdotal reports are streaming into Washington that key sectors, especially tourism, are already in a deep recession.

4. A Fed rate cut, which Trump has demanded, did nothing to ease the recession fears. Trump’s call for even more easing will fall on deaf ears; a refinancing boom is imminent, thanks to the fixed income markets, which already drove rates to ultra-low levels — so why should the Fed waste its remaining bullets if the markets can do the heavy lifting?

THESE FOUR DEVELOPMENTS have prompted a frantic scramble at the White House to come up with new fiscal policies. Money will be no object (it hasn’t been for the past few years). We expect trial balloons on a business tax credit, paid sick leave, individual tax cuts, a temporary lifting of trade tariffs, spending for new medical facilities — you name it.

BUT THIS VIRUS SIMPLY MAY HAVE TO BURN ITSELF OUT, as the country adopts dramatic changes in how we work and travel and interact with others. Throwing huge amounts of money at a problem isn’t always the answer — just ask Mike Bloomberg.

The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), Highstreet Asset Management Inc. (Highstreet), AGF Investments America Inc. (AGFA), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI and Highstreet are registered as portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

For further information, please visit AGF.com.

© 2020 AGF Management Limited. All rights reserved.

This post was first published at the AGF Perspectives Blog.