by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
Author:Ā Greg Valliere
March 13, 2020
THE MARKETS HAVE COLLAPSED, the sports world has collapsed, and the Trump Administration has collapsed ā abdicating to the steely Nancy Pelosi on policy, abdicating to health experts like Dr. Anthony Fauci, and potentially abdicating to Joe Biden in November.
WHEN THE HISTORY OF THIS SHOCKING COLLAPSE is written, its defining chapter may focus on Donald Trumpās appalling speech on Wednesday night ā poorly delivered, filled with errors, insulting to European allies, and a disaster for the financial markets.
WE TALKED WITH INSIDERS YESTERDAY who are stunned by the speech and Trumpās improvised happy talk. One source said that within the White House, thereās dismay that policy is being crafted by Jared Kushner, who has no expertise on health issues.
THEREāS BEEN NO DIRECTION from the White House on policy responses, so Pelosi has filled the void, winning concession after concession, prevailing with 14 days of paid sick leave, more generous unemployment benefits, free virus testing, etc. Many of the concessions could be permanent.
SOME REPUBLICANS HAVE RESISTED THESE NEW BENEFITS, but Pelosi has prevailed in negotiations with Steve Mnuchin. āItās not a fair fight,ā says one Capitol Hill source. The House will pass its bill later today ā without a big tax cut ā and the Senate will stay in town next week to complete the measure. It will be Pelosiās bill, not Trumpās.
THE MONETARY RESPONSE WILL BE MORE SIGNIFICANT, as the Federal Reserve will do more, following its stunning moves yesterday to boost liquidity in the markets. A rate cut of at least 50 basis points is likely when the FOMC meeting ends on Wednesday.
WITH FISCAL AND MONETARY POLICY barely reacting to White House interference, this leaves Trump with plenty of time to improvise to reporters during photo-ops, but the damage has been done. His lack of empathy is hardly surprising, but his refusal to listen to the experts ā and his distortion of their grim assessments ā has become an embarrassment.
BASED ON WHAT WEāVE SEEN IN THIS INCREDIBLE MONTH OF MARCH, Joe Biden is the favorite to win in November. The contrast between the two men was glaring yesterday ā Biden angrily denounced White House incompetence and offered a specific battle plan, while Trumpās disastrous speech left Washington shell-shocked.
A MAJOR REASON WHY BIDEN IS THE FAVORITE is the remarkable exit polling in Michigan, which he won handily on Tuesday. Virtually every key demographic group ā college educated women, blue collar workers, and of course African-Americans ā overwhelmingly supported Biden, an ominous sign for Trump.
IF BIDEN CAN GET THROUGH SUNDAY NIGHTāS DEBATE relatively unscathed, a consensus will grow that heās the general election front-runner. Trumpās hard-core supporters will resist that narrative, but many of them still believe the virus is a media hoax; Trump canāt win in November with only one-third of the electorate.
MUCH WILL CHANGE between now and the election. The economy should respond to modest fiscal stimulus and massive monetary stimulus. The virus could level off this spring and it could be a very bad memory by November. The Democrats could over-play their hand. But on this very bleak Friday the 13th, Donald Trump is starting to look like a one-term president.
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This post was first published at the AGF Perspectives Blog.
